A new YouGov report finds that while a majority of people who borrow money through non-traditional financial channels such as pay-day loans or peer-to-peer loans do so for large, one-off purchases, a significant proportion of these borrowers are now dependent on such lending in their daily lives.
The “Non-standard lending” report suggests that non-standard lending is primarily used for large, one-off items and essential household expenditure. Three in ten (30%) non-standard borrowers used their loans to fund a particular item (e.g. holiday, car) and the same proportion (30%) used the finance to cover day-to-day domestic costs.
The report found that almost four in five (79%) of those who say they are in serious financial trouble have used a non-standard lending product in the past two years. Furthermore, the report shows that over a third (34%) of non-standard borrowers are now dependent on non-standard lending to pay for their day-to-day bills and expenses.
Counsumers ‘in dark’ over non-standard lending loans
The report also shows that the majority (55%) of consumers taking out small-scale loans through non-traditional financial channels are ‘in the know’ about what the loans they have taken out are and how they work. However, the research shows that more than four in ten (45%) have low levels of knowledge about the non-standard lending products they have signed up to.
The findings reveal that borrowers with the most knowledge tend to take longer when borrowing through a non-standard lending channel while those with less knowledge make faster decisions. The YouGov Report's data shows that 56% of those ‘in the dark’ chose their product in less than one week, compared with 48% of those ‘in the know’.