Affordability warning as two-thirds of borrowers unaware of their interest rate

More than 40% of people say that it is more important to be accepted for the loan than the rate of interest charged, including (54%) of 18-44-year-olds.

Overall, 60% of borrowers say they don’t know the cost of their loan, a problem that spans generations and genders.

Sam Marks, financial services analyst at Mintel, said: “The fact that so many borrowers don’t know the interest rate they’re paying on their loan suggests that many simply opt for the most convenient option, rather than shopping around.

“Half of consumers say they didn’t consider other ways of borrowing when taking out their last personal loan, which suggests that many don’t have the time to consider all of the options open to them.”

Marks said the market is still heavily reliant on cross-selling as most consumers resort to checking rates with their main current account provider.

However, price comparison websites and the rise of soft-searches have given consumers a wider array of lenders to choose from and this has increased transparency in this market.

Research for Mintel’s Unsecured Loans UK 2018 report was carried out online among 1,941 loan recipients.

The importance of obtaining evidence to confirm affordability of auto finance was highlighted at this year’s International Auto Finance Network conference, where Joanne Davis, partner and head of asset and consumer finance at Locke Lord, warned that a lack of evidence could lead to a complete unwind of agreements.

She said: “Evidencing is really important. From the complaints that we are now seeing, a huge part of it is lenders having to pay out with a complete unwind of the deal because they can’t evidence that they have taken responsibility to ensure that the customer is not only credit worthy, but that the lending is affordable as well.”