Confusing Ts&Cs, rejections and high-cost unregulated products — the credit landscape is daunting for Gen-Z.
At Prograd, we’ve built a marketplace to make borrowing what it should be for young people: understandable and empowering. A survey we ran of 2,500 18–25-year-olds about why and how they approach taking credit confirmed that the current reality is anything but. Here are some things you should know about the people we’re trying to do better by.
Understanding how the hell all this credit stuff works isn’t easy 😕
Of the peeps we surveyed, 15% of those who had never considered taking credit of any sort steered clear purely because they couldn’t understand the fundamentals of how taking credit worked.
1 in 3 first-time credit takers stated that they found it “difficult” or “very difficult” to understand the core concepts of taking credit. Worse still, 1 in 3 of those first-time credit takers found it “difficult” or “very difficult” to understand the terms of the offer that they were actually taking.
Arrears? Rebate? APR vs interest rate? Unsecured vs secured? Variable rates? Early repayment charges? Add into the mix uncertainty about how credit reference agencies may or may not be considering behaviour with products like Buy Now Pay Later and you can understand why so many find it challenging to approach borrowing. Scarily, complaints from Gen-Zers to the Financial Ombudsman regarding debt services have dramatically increased over the last 5 years.
At Prograd, we use video content and plain language throughout the discovery and checkout journey to actually explain what you’re looking at. Gen-Z looks to TikTok to understand personal finance principles…so we can do away with walls of text and icons, thanks.
Getting accepted for credit is tough 🚫
Young people have short credit and income histories, meaning that even if they’ve been able to understand what kind of credit product they might need it can be incredibly difficult to actually get hold of one. Our founders came up against this first-hand — they were unable to find sustainable funding for their Masters degrees despite offers from top universities and employers after graduation.
15% of those we surveyed had applied for credit but were flat-out unsuccessful in getting an offer.
We’re working hard on under-the-hood machine learning models that will allow lenders completely new ways to assess young people’s creditworthiness and affordability, empowering them to lend to individuals with thin credit and income files with more confidence and build completely new sustainable financing products. Watch this space.
When you do get accepted, it can be highhhh cost 💰
Of the first-time credit-takers that were successful, 35% of them considered taking credit a “necessary evil” or something to be “avoided at all costs”. And no wonder. One alternative lender can be found to offer a line of credit at 89% representative APR. 89%. Eighty-nine per cent.
At Prograd, we don’t offer any credit at egregious APRs. Instead we offer young people appropriate alternatives alongside borrowing routes — have you considered turning your hand to freelance work to generate more income? What about hyper-flexible temp work? And so on.
Uniquely, to lessen the impact of the high-cost reality of debt for young people, Prograd rewards young people with cashback for achieving meaningful milestones in their life, like completing a year at university, graduating, or getting a new job. Because, that’s how rewarding borrowing behaviour should work. Young people aren’t in the market for “financial products”. They’re motivated by a purpose — to pay for their education, get on top of their living costs in a new city or respond to an emergency cost at home. So, instead of rewarding people for further spending, we reward them for achieving what they took out credit for in the first place.
If you’re a lender or investor and feel like us, that the way we assess people for lending decisions is going to and should look drastically different in 5 years, then drop us a line: james@prograd.uk.
