Borrowing Behaviour

01 August 2019

People on low-incomes are less likely to use credit than those on higher incomes and when they do borrow it is usually for essentials such as food and household bills.  However, people on low-incomes are more likely to use high-cost lenders when they do borrow according to a new study released today [6 August].

For example, UK consumer survey data shows that 38% of adults with household incomes less than £15,000 per year are credit users, compared with 56% of adults in the household income bracket £30,000-£50,000 and 55% with household incomes of £50,000 or more. Research examining the UK, Germany and USA found that in all these countries consumer credit use was lowest amongst households in the bottom (income quartile).

The study, carried out by the University of Bristol’s Personal Finance Research Centre for Standard Life Foundation, reviewed around 150 existing studies on borrowing behaviour. Researchers found that details such as credit card design, credit-limit increases and other marketing also increase borrowing. When it comes to high-cost credit, speed, convenience and easy access attract people, particularly if they have few other credit choices.

Researchers also found that young people today borrow more than their previous generations as debt becomes normalised. The evidence shows that borrowing increases with age, typically peaking when people are in their 30s and 40s, and then declines.

The study also raised concerns that young people, with lower financial literacy, are particularly at risk from poor borrowing decisions. However, increasing financial education for young people is not necessarily the answer. The evidence is weak regarding the impact of financial literacy programmes (which tend to focus on financial knowledge) upon financial behaviour.

Mubin Haq, CEO, Standard Life Foundation, said:

“Contrary to popular belief, people on low incomes use considerable caution when borrowing money. They’re less likely to borrow than those with higher incomes, but when they do it’s usually for essentials such as food, paying the electric bill or rent – it’s not for luxuries. However, those on lower incomes are more likely to use high-cost credit, partly due to the limited choices available. This report has brought together strong evidence on the impact borrowing has on the financial well-being of those struggling to make ends meet. It highlights the need for greater action including in relation to the cost of borrowing and the need to boost incomes.”

Professor Sharon Collard said:

“There is worrying evidence about the growth and nature of young people’s borrowing behaviour. Young people are more vulnerable to poor borrowing decisions and outcomes, they also make the most financial mistakes and have the lowest levels of financial literacy. This raises concerns about young people’s financial well-being, poor decision making may adversely impact them in a range of ways, including debt-related stress.”

About Standard Life Foundation

Standard Life Foundation’s mission is to contribute towards strategic change which improves financial well-being in the UK.  It wants everyone to have a decent standard of living and have more control over their finances. It is particularly interested in improving lives for people on low-to-middle incomes.

It is an independent charitable foundation funding strategic work including policy work, campaigning and research.

Its funding comes from the unclaimed assets from Standard Life’s demutualisation. Standard Life Aberdeen respects the Foundation’s right to create its own strategy and to speak out about the social issues it is seeking to address.

About the Personal Finance Research Centre

The Personal Finance Research Centre (PFRC) is an independent research centre, based within the University of Bristol’s School of Geographical Sciences, that specialises in social research across all areas of personal finance. For more information please visit

The full report and findings are available to download.