Near-prime consumers hit hard as borrowing costs rise

26th November 2021

New research by Credit Karma has found that near-prime consumers have been hit hardest as borrowing costs rise.

The research findings show that near-prime borrowers pay £39,000 more interest over a lifetime than prime with the gap increasing by 10% (£3,400) over the last 12 months.

Credit Karma’s report annually quantifies the lifetime cost of borrowing for prime, near-prime and subprime consumers – across mortgages, loans, credit cards and car finance.

The research also showed that around one in four UK (approx 12 miillion people) are considered ‘near-prime’ – between prime and sub-prime. They may have missed a payment on a credit card, or have a ‘thin file’ with little or no track record with credit. As a result, they pay higher interest rates on borrowing.

While the cost of borrowing has increased for everyone over the last year, near-prime borrowers are being hit the hardest.

A year ago, a prime borrower was likely to pay £114,500 in interest over a lifetime, compared to a near-prime borrower, who would pay £150,100 – or £35,600 more in interest. This gap has increased by 10% in the last year, rising to £39,000 (see table below).

Subprime often indicates a much riskier lending profile. With poor credit histories, these borrowers tend to have a more difficult time repaying debt on time and, in some cases, have even defaulted on loans. As a result, they pay significantly more to borrow money than their near-prime or prime counterparts. Yet, the gap between prime and subprime pay in interest has changed marginally in the last year (up 0.5%).

The good news is that being near-prime is exactly that – very close to having the best category of credit score. And because near-prime credit strength can be as much about a lack of financial history as a poor record, near-prime borrowers can often become prime by taking a few simple steps, such as paying your bills on time every month, getting on the electoral roll or by checking for and disputing errors on their credit report.

Ziad El Baba, General Manager at Credit Karma, said “These figures underline how important it is to start managing credit early and carefully. That starts with understanding the fundamentals of credit and knowing where you stand. This will help you avoid being considered near-prime simply because you lack a credit history.”

“One thing to remember – not all debt is bad. If you take out a credit card to build your credit, you don’t need to rack up debt to do so. Instead, use your credit card carefully and always pay your bill on time – and pay the full balance if you want to avoid interest. This will demonstrate to lenders that you’re a trusted borrower and will help you get better rates when you actually need it – say, for car finance or a loan. This can save you a lot of money in the long run.”


Lifetime cost (interest) to borrow – 2020-2088

Lifetime cost (interest) to borrow – 2021-2089




Diff – Prime to near-prime






Diff – Near-prime to subprime






Diff – Prime to subprime