Alternative lending borrowers four times more likely to face debt

Users of alternative financial products, like home-collected loans and payday loans, are four times more likely to be contacted by a debt collector, according to a new study of customers by Lowell.

One in five adults who use alternative financial products were contacted by a debt collector in 2023, while one in twenty people in the public were contacted by a debt collector in the same period.

The study also found over a third (35.8%) of adults are held back from facing their debts due to fear of the unknown. The study identified ‘fear of the unknown’ and ‘embarrassment’ as the main reasons for not speaking to creditors about their debts.

As part of Debt Awareness Week, Lowell commissioned two studies to produce the findings. The first was a nationally representative poll of 8,000 people, conducted by Opinium, into UK consumer financial habits. The second is a Customer Survey of 350 Lowell customers, looking to understand attitudes towards debt and getting debt-free.

The findings also found that 51.5% took more than 3 months to get in touch with their creditor. The ‘fear of the unknown’ (35.8%) and ‘embarrassment’ (23.5%) were the main barriers to people speaking with their creditor. 81.6% say their debt negatively impacted their mental wellbeing whilst 53.6% said they struggled with other debts and paying everyday essentials such as bills.

Commenting on the research, John Pears, UK CEO of Lowell, said “The human emotions behind debt remain the same but the imperative to overcome them is only growing. Taking the first step and facing your debt is the most important.

“But in this country, we still find it difficult to talk about money, especially debt. We need to help people understand money better – how it works, how to manage it. When people understand that their finances aren’t something to be ashamed or embarrassed about, they start talking. They seek support We know that the earlier people seek support, the better off they are – financially, physically and mentally. As an industry and as a nation, we have to prioritise breaking down the barriers to engagement, beyond Debt Awareness Week.”