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Peer2Peer Finance News | November 14, 2018

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One in six households apply for loans to cover household bills

One in six households apply for loans to cover household bills
Rebecca Goodman

FIFTEEN per cent of short-term loan applications are being made to cover household bills, new research has revealed.

Of the 35,000 loans peer-to-peer lender Welendus has received this year, 5,000 have been to meet the cost of regular bills.

The FCA-approved ethical lender has revealed that 2,400 of those loans were specifically to cover household utilities such as gas and electricity bills.

Read more: Welendus expresses caution over problem debt proposals

Some 42 per cent of loan requests were to pay for surprise bills, highlighting the severe financial difficulties many people in the UK face as wages remain stagnant and living costs continue to rise.

The research showed that it wasn’t just low-income households making loan requests as 77 per cent of applicants were in full-time employment. A significant percentage of these were also earning above the average UK salary.

All of the big six energy firms have announced at least one price hike this year, along with a number of smaller providers.

As the winter sets in, the lender says it expects to see more applications for loans to cover energy costs.

Read more: Welendus launches IFISA offering 15 per cent returns

The government’s energy price cap, which will be introduced on the 1 January, is expected to bring little relief to those struggling with high energy bills.

It is estimated to save customers with a standard variable tariff an average of £70 per year at the current rate of £1,136. However, this is expected to be raised in April due to a spike in wholesale prices.

Nadeem Siam, founder and chief executive of Welendus, said: “The majority of loan applications we receive come from those working full-time jobs with long hours.

“The current economic climate, combined with a high cost of living and near-constant commodity price hikes, has meant that even those working and on good salaries can be left without enough cash for scheduled bills.

“A huge percentage of the UK population don’t have savings, and we aim to provide a simple and ethical resource for emergency cash flow problems.”  

Welendus was launched at the start of the year. It aims to offer ethical loans to consumers and to provide an alternative to those faced with the high rates charged by payday lenders.

Its chief compliance officer, Amer Bhatti, recently said government proposals to provide more “breathing space” for individuals struggling to deal with debt did not address the root causes of the issue.

Bhatti added that he is sceptical about the practicalities of the proposals and thinks more needs to be done to help people getting out of debt in the first place.

Read more: Welendus slams “extortionate rates” on emergency cash