Freedom Finance welcomes growth in consumer finance
Digital lending marketplace Freedom Finance has welcomed data showing that consumer finance new business grew by 13 per cent in 2022 compared to the previous year.
The latest data from the Finance & Leasing Association (FLA) revealed that, while consumer finance new business fell by four per cent year-on-year in December 2022, it was 13 per cent higher in 2022 overall than in 2021.
The credit card and personal loan sectors together reported new business up by 17 per cent in 2022 compared to 2021, despite credit card rates reaching their highest level since 1998 and continued growth in personal loan rates.
Auto finance was up by nine per cent and retail finance by seven per cent.
Read more: Credit card rates dip while personal loans keep rising
“Growing innovation has driven this expansion,” Freedom Finance chief revenue officer Michael Davidson said.
“The retail and auto finance markets, for example, have benefitted hugely from the embedded finance revolution which makes it easier for consumers to access more loan products that are a better fit for their circumstances to support their purchases.”
Davidson said it remained important for consumers to shop around for credit to get the best rates and the most appropriate products for their needs.
“Digital marketplaces help consumers access a wide range of products and a variety of well-trusted brands and lenders,” he added. “Marketplaces also use soft-search technology so consumers are only offered loans or credit cards that they know they will be eligible for.
“This is vital because not only does it help borrowers get more tailored deals for their circumstances, but it helps to avoid declined applications.”
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He also said that shopping around helps to widen access to the credit market as research from the Financial Conduct Authority has revealed that millions of people are deterred from applying for loan products because they are afraid of being rejected.
Nearly half (46 per cent) of those put off from applying for credit said that they were afraid of the impact on their credit score or felt there was no point in applying.
“Debt consolidation is another major theme of the current economic cycle,” Davidson said. “It is a good way for people to convert multiple debts into a single monthly payment to make it easier to track while possibly accessing a preferential rate. There is also the option to widen the repayment term – this may make immediate payments more manageable but can mean people pay more interest in total.
“A responsible and proactive lending industry has a huge role to play in supporting consumers and helping them navigate turbulent times.”
Read more: Zopa, RateSetter join Freedom Finance marketplace