One in four borrowers rely on credit to cover essential spending

25th October 2023

Higher loan rejections and limited traditional affordability checks are impacting consumers’ ability to access credit to help make ends meet, according to new research from Tink.

The company’s research found that those who hold either a mortgage or loan suggest that a significant number of consumers need to find a way to bridge the gap between income and expenditure each month.

With nearly one in three (29%) respondents running out of money before the end of each month, many are using credit (25%), instalment or delayed payment options (23%), and loans (16%) to cover essential costs.

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 people are finding it difficult to qualify for loans, with 58% of lenders surveyed noting 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 greater lengths to try to secure borrowing.
● More than one in ten (12%) say that when refused a loan, they have reapplied with a different lender.
● An estimated one in ten (9%) 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, while protecting struggling borrowers from getting into financial distress.”

“Perhaps as a result, an estimated 82% of lenders believe the cost-of-living crisis makes affordability checks more important than ever and 77% acknowledge the need to improve their risk decisioning models to give the most accurate view of people’s finances.”