One in four Londoners have used or would consider using a loan shark or illegal lending. This is as almost one in three (30%) London residents struggle to access loans or credit cards, according to research by Plend, the affordable and sustainable lender.

The research, a survey of 4,000 UK adults, also found that 41% of London residents feel locked out of the financial system, far higher than the UK average of 28%.

With rents at record highs, interest rates at a 16-year high, and the cost of living continuing to bite, it is difficult for London residents to see when they can catch a break. More than a quarter (26%) stated that they don’t think the cost of living will stop impacting them until 2025 or later.

The inability to access affordable credit is only compounding what is already a very difficult time for many. Not only are Londoners struggling to obtain loans, but when they do, they are paying more for them.

The average APR of loans for Londoners is 25.5%, considerably higher than the UK average of 20.3%. And six in 10 Londoners have made sacrifices in order to pay back their debts during the last 12 months. The highest amongst all UK regions.

As headlines focus on falling inflation rates and the prospect of a summer of interest rate cuts, it is clear that this ‘recovery’ is not equal, with even higher earners sharing their concerns.

The report indicates that women are particularly affected, with an increased likelihood of having to borrow money (45% of women vs 38% of men), suffering negative mental health impacts due to the cost-of-living crisis (50% vs 36%), as well as difficulties in repaying loans (72% vs 65%).

The cost-of-living crisis has also had a disproportionate impact on people from ethnic minorities, who are far more likely to report feeling locked out of the financial system than their white counterparts.

Those from ethnic minorities are also twice as likely to have been rejected for a loan in the last 24 months, often exasperating existing financial difficulties. This is highlighted by the fact that 57% of those from ethnic minorities feel their financial situation would improve if they had access to a loan with a fair interest rate, compared to 39% for white people.

Tayga, an entrepreneur and higher earner, had no credit file when he moved to the UK last year. He is effectively invisible to traditional lenders, most of whom have a criteria to filter out newcomers to the country, and therefore has struggled to use financial services despite earning significantly more than the average salary.

He said: “Being filtered out of loan applications solely because I’m new to the country is beyond frustrating. It’s clear that credit assessments are outdated and fail to understand people’s real situations. There’s new technology available, yet lots of lenders aren’t using it to truly assess borrowers’ circumstances. It’s time for a change.”

Robert Pasco, CEO and co-founder of Plend, said: “Because of this significant shrink in credit supply, people are forced to use unregulated and illegal lending solutions. I find it astonishing that so many people are financially vulnerable, with an increasing number of us unable to afford high-cost debt repayments or even access vital regulated credit alternatives.

“At Plend, we have made four recommendations for enhancing access to affordable credit in the UK, these include: FCA guidance on the role of open banking on consumer credit assessments, a strategy from Government and regulators to tackle financial exclusion, the expansion of government backed products and pilots that promote inclusive lending, and improved signposting and referrals for declined customers. These are all vitally important.”