Credit, Collections & Insolvency News
New research by the Financial Conduct Authority (FCA) has highlighted the borrowing patterns of consumers during the pandemic, with men have borrowed more during the crisis (9% of men and 6% of women).
The research looked at the impact on the finances of men and women during the pandemic and showed that before the pandemic, men were more likely to hold credit cards or loans than women (87% of men and 83% of women).
However, women were more likely to hold retail credit (36% v 24%) or high cost loans (13% v 8%). A quarter of men (24%) applied for credit between March and October 2020, compared with a fifth of women (18%).
More men have borrowed on one loan to make payments on another (6% of men and 3% of women) whilst 22% of women have cut back on essentials compared with 16% of men.
Commenting on the research Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown said “The crisis has torn through the finances of one in three people, but men and women have reacted very differently. While women have cut back on the essentials, men have dipped into savings and investments, and borrowed their way through the crisis. It’s likely to mean that unless their household finances get back on track soon, men are likely to run out of road first.”
“Even before the pandemic, men were more likely to hold credit cards and loans than women, but during the pandemic they’re also more likely to have applied for credit, borrowed more – and borrowed from one provider to pay back another. In some cases this is because they can: men tend to be on higher and more reliable incomes, so feel more comfortable that if they borrow they’ll be able to pay it back. They may also be able to access cheaper borrowing if they have a good credit record.”
“Women, meanwhile, tend to be operating closer to the margins. It means when crisis struck they were much more likely to cut back on essentials, and do everything they could to make ends meet without borrowing more. They may be unable or unwilling to borrow more, because they are concerned about repayments. However, it’s not just a matter of means, because even when they can’t afford to borrow more, men have given it a go anyway: 11% of men have applied for credit and been turned down during the crisis, compared to 8% of women.”
“When they’re knocked back for credit, women are far more likely to have done without whatever they were hoping to borrow for, while men are more likely to hunt down other lenders willing to give them cash. The FCA found that some people have taken truly worrying steps to try to solve their money problems – including the 14% of men who were turned down for debt who approached an unlicenced lender, and the 4% of men who have tried to solve their money issues by gambling more.
“The problem with borrowing your way through the crisis is that eventually you’ll reach the point where either nobody will lend to you any more, or you simply can’t cope with the level of debt and the size of the interest payments. The longer you try to borrow from Peter to pay Paul, the bigger the problem you’ll built up.”
“The pandemic has opened the gender pensions gap even wider. The FCA found that out of those who were paying into a pension in February, men were more likely to have cut their contributions – 12% compared with 9% of women. However, more women have stopped contributions altogether – 7% compared with 5% of men.”