A new survey from credit-building business, Loqbox, has revealed just how many people in the UK are struggling to understand how credit works and what it means for their everyday lives.
At a time when the average credit score in the UK is 644 on the Equifax scale and an estimated 1 in 10 Brits are credit invisible, the report found that a third of UK adults don’t understand basic borrowing terms. Even more concerning, one in ten are now turning to Buy Now, Pay Later (BNPL) just to pay for essentials like food and fuel.
Loqbox’s report, ‘Borrowing money in the UK: What people get wrong and how to get it right’, looks at how people use credit, what they know about it and how they feel about borrowing. It found that while credit can help make big life moments more manageable, it also carries risks, especially for people who are already struggling to make ends meet.
When money is tight and options are limited, many people feel they have no choice but to borrow, without always considering how they’ll make the repayments. But confusing language, unclear terms and hidden fees in credit agreements often leave people unsure of what they’re really signing up for, and that lack of understanding can lead to debt levels that feel unmanageable. Sadly, for some of those excluded from mainstream credit, they’ve been left with no option but to go to high street loan sharks for the money they need and are at the whim of shockingly high interest rates and fees, with no legal protections.
The report also contains a survey, which was conducted in conjunction with polling firm Censuswide, offering one of the most in-depth examinations of why people borrow on credit, how they access them, and their attitudes towards managing personal finances across the UK. The Loqbox/Censuswide survey gathered 1,000 responses from across the UK, including Scotland, Wales and Northern Ireland, from young adults aged 18 to those 55 and over and across all income brackets – giving a comprehensive overview of the UK population’s appetite for credit, as well as their awareness, perceptions, decision-making, and understanding of borrowing.
Key findings include:
- 31 per cent of people had borrowed money in the last year, with 49 per cent using credit cards, 35 per cent using personal loans, and 18 per cent using Buy Now, Pay Later (BNPL).
- Just one in four (25 per cent) said that they always think about whether they can keep up with repayments in the long term when borrowing money.
- Only 23 per cent say that they pay off existing debts before borrowing more.
- BNPL is most popular with people aged between 45-54, followed by those aged 18-24.
- Women were more likely to borrow on credit cards (54 per cent vs 50 per cent for men), and men were more likely to borrow on BNPL (19 per cent vs 16 per cent for women).
- 11 per cent say they use BNPL to pay for essentials like food and fuel.
- Just 14 per cent always read the small print when they borrow money.
- 33 per cent admit to not understanding key borrowing terms.
- The largest group borrowing less than £100 were in the North West, with Liverpool ranking as the location of the largest group of borrowers in this category.
Tom Eyre, co-founder and CEO of Loqbox, says: “How we view money, and what we know about how to borrow it, can literally alter the direction of our lives. When used responsibly, credit is an incredibly powerful tool that helps people reach important milestones, whether it’s renting somewhere new, buying your first home, that dream holiday, wedding or other momentous occasion. Credit can help achieve life’s special occasions. However, it’s so important that people have the facts and the tools to help them manage this credit responsibly.”
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