Higher loan rejections and limited traditional affordability checks are impacting Brits’ ability to access credit to help make ends meet. A significant number of Brits today need to find a way to bridge the gap between income and expenditure each month.
This is according to new research from Tink, who conducted a survey of 1000 UK borrowers. Nearly one in three respondents revealed they are running out of money before the end of each month. 25% are using credit to cover essential costs, as well as instalment or delayed payment options and loans.
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Rejected loan applications are growing
However, Tink’s accompanying survey of 200 UK lenders, including mainstream banks, shows a continued squeeze on consumers’ finances. While many people are turning to credit to make ends meet, more are finding it difficult to qualify for loans. 58% of lenders surveyed noted a greater number of rejected applications due to people not meeting the affordability criteria.
This means that some struggling consumers, who may desperately need access to loans, are going to great lengths to try to secure borrowing. More than one in ten say that when refused a loan, they have reapplied with a different lender. An estimated one in ten borrowers say they have exaggerated their income in their application. 9% say they have underreported their monthly outgoings when applying for finance. 8% have sought a loan from an unregulated lender because they couldn’t secure a loan elsewhere. 35% of lenders have seen a rise in application documents being edited.
Tasha Chouhan, UK Head of Banking and Lending at Tink, said: “With many traditional credit checks making it difficult for people to gain access to loans, those who most need financial support are resorting to desperate measures. By prioritising investments in data-driven lending models, lenders can make more informed credit decisions to widen credit access to those who can afford it. Meanwhile, protecting struggling borrowers from getting into financial distress.
An estimated 82% of lenders believe the cost-of-living crisis makes affordability checks more important than ever. While 77% acknowledge the need to improve their risk decisioning models to give the most accurate view of people’s finances.
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By GlobalData
