According to the research, several challenger brands and digital-only lenders increased unsecured personal lending to consumers by over £1.5bn in 2022.

In addition, Freedom Finance found out that demand on its platform is now 50% higher than at this point last year. As demand has increased, so too has the range of people using the platform. In 2022, both the size of loans applied for and the average household income of those applying for loans increased by 9%.

The increase is due to new higher-income users who have decided to join the digital banking marketplace. The new trend also reflects increasing demand for personal loans from households that previously did not use them.

CEO at Freedom Finance Emma Steeley said: “Despite the worsening credit conditions at the end of last year, 2022 still saw significant increases in demand for credit on our platform and across the market.

Tightening credit conditions, Steeley noted, are prompting more people to use soft credit search technology, which helps them find competitive rates when shopping.

“As loan sizes increased at the same time as credit conditions tightened, we have seen new lenders serving more affluent households shopping for credit products through our proprietary technology platform”, Steeley continued. “We have also seen an increase in the number of people who have missed payments in the past using our platform. Because our soft search technology reduces the risk of people applying for loans that they are not eligible for, this is helping to protect their precious credit scores.”

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Why is unsecured lending becoming increasingly popular

Over the last few months and following the recent collapse of SVB and Signature banks, customers have grown increasingly concerned about the safety of their banks.

A recent study conducted by TheMoneyMongers reveals that customers are most concerned about the safety of their accounts with private and investment banks. In particular, UBS customers have shown the highest level of worry, with searches for “Is UBS Safe” increasing by a staggering 8,700% during March 2023. On the other hand, retail banking customers have been less anxious about the safety of their banks. The study found that searches for “Is HSBC Safe”, “Is Barclays Safe”, “Is Lloyds Bank Safe”, and “Is Standard Chartered Safe” increased by 1329%, 841%, 555%, and 181%, respectively, from February to March 2023.

Nevertheless, growing mistrust in banks is propping more people to seek unsecured lending options from banking challengers.

“These new users demonstrate the appeal that fintech platforms, like Freedom Finance, hold for increasingly savvy credit customers who are comfortable using digital tools to access the best financial products available on the market”, Steeley from Freedom Finance concluded.