A new study from Creditspring is sounding the alarm on a deepening financial literacy crisis in the UK — one where millions of consumers are taking on credit products they don't fully understand, with real consequences for their financial stability.
The research, based on 2,000 UK consumers, paints a stark picture. Only 42% of people feel confident explaining the total repayment amount before taking out a loan. Just 27% say they could explain APR to someone else. And one in five doesn't know which figure actually shows the total cost of credit when comparing products.
Where the Gaps Are Deepest
Credit scores remain widely misunderstood. Only 36% of respondents could confidently explain what a credit score is, while more than half (53%) wrongly believe their income directly affects it. Newer products are even murkier — nearly 3 in 10 consumers are unsure whether Buy Now, Pay Later (BNPL) has any impact on their credit profile at all.
The confusion around 0% interest products is particularly concerning:
25% believe 0% interest products are completely risk-free
20% are unsure what 0% interest actually means
Women are disproportionately affected, with 24% unsure vs. 17% of men
Income plays a significant role too. Confidence in understanding credit scores stands at just 31% among those earning £15,000–£25,000, compared to 56% for those earning over £75,000 — meaning the people with the least financial resilience are often the least equipped to navigate credit safely.
Neil Kadagathur, CEO of Creditspring, put it plainly: "People aren't making reckless decisions — they're making decisions without being given the full picture. When key concepts like APR or total cost aren't clearly understood, it becomes far easier to misjudge risk and fall victim to financial instability through no fault of their own."
He called on lenders, regulators, and policymakers to set clear standards for how financial products are presented — transparent, accessible, and designed to help consumers make informed decisions.