Lenders reject more consumers as credit crisis worsens
More than half of lenders are rejecting more applications from consumers as a rising number of Brits turn to consumer lending to get through the cost of living crisis.
According to new data from Tink, a quarter of Brits are now relying on credit to cover their essential spending, with 29 per cent admitting that they run out of money before the end of each month. 25 per cent of consumers use credit to cover their costs, while 23 per cent turn to instalment or delayed payment options, and 16 per cent use loans.
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The rising number of consumer loan applications has led to a spike in the number of loan rejections, causing three quarters of lenders to revisit their risk decisioning models. One in 10 customers told Tink that they have exaggerated income or gone to a different lender after being rejected for a loan.
“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,” said Tasha Chouhan, UK head of banking and lending at Tink.
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“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.”
Tink’s research found that lenders are expecting to see a rise in defaults as consumers struggle with the cost of living. As a result, 82 per cent of lenders believe the cost-of-living crisis makes affordability checks more important than ever and 77 per cent have pledged to improve their risk decisioning models to give the most accurate view of people’s finances.
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