Consumer Debt – what are the most popular credit products?

Introduction

The UK is a credit nation, we discussed this in a Blog only a few weeks ago. The findings were based on a report by the House of Commons Library which we used to compare the UK to other nations. We made comments on how cultural and economic differences impact on the use of credit. In this blog we ask, what are the most popular credit products?

What are Consumer Credit Products?

When we refer to consumer credit products we are including any type of consumer credit, from a deferred sofa payment to a repayment mortgage. Or a secured personal loan to a bank overdraft or credit card balance. Consumer credit products typically have an interest rate or APR, unless they are 0% as part of a deferred ‘buy now pay later’.

As consumers many of us are used to credit in our everyday lives. From a mortgage for our home, car loan, 0% interest for furniture, credit card balance, overdraft or payday loan. But what are the most popular credit products in the UK?

Popular Credit Products

As a nation of homeowners it’s no surprise that over a quarter of adults have a mortgage. Or that nearly one in two adults have some form of regulated credit. Credit card and overdraft, should either be prolonged, are often better converted into a personal loan. Typically this offers a more competitive interest rate.

Demographic Trends

Within the adult population that have consumer credit products, the peak age group is 35-44 years. This would be typically when the average family has young children, careers are still being built and credit is used to purchase items and experiences. The lowest age group for credit are the over 75’s. They have either built financial security or due to retirement are limited by what they need or can afford.

Typically credit is most widely used by adults earning £50k – £100k per annum, which is symptomatic of the lifestyle they are looking to create. Those on very low incomes tend to have less credit products (due to affordability). However, they have the highest percentage of high-cost credit – which tends to include catalogues and payday loans.

Summary

As an observation of the UK, the credit products taken out by the population provide insight into where future issues may arise. Therefore we can take steps to avoid future financial hardships. For middle class incomes, mortgage and income protection products may protect against job losses or health issues. For low income adults, trying to avoid high cost credit and use high street banking or family loans may offer a cheaper solution.

At Saascoms we’re not financial advisors or planners. But as our software powers the credit and collections industry it’s important we stay in touch with the market.