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Rising APRs Not Slowing Inquiries in Personal Loans — Especially for Debt Consolidation

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While rising APRs won’t impact those who already have fixed-rate personal loans, new borrowers won’t be as lucky.

When the Federal Reserve raises its target federal funds rate — as it has done six times this year — lenders usually respond with increased APRs on new loans. But rising APRs aren’t slowing inquiries in personal loans, according to the latest LendingTree study.

Personal loan inquiries grew 12.3% on our platform between the third quarters of 2021 and 2022. This increased interest was led by a 29.1% jump in personal loan inquiries for debt consolidation.

Let’s take a closer look at how personal loan inquiries and offered APRs have changed over the past year.

Key findings

  • The number of personal loan inquiries on the LendingTree platform for debt consolidation spiked 29.1% between the third quarters of 2021 and 2022. Meanwhile, inquiries for business financing plummeted by 39.8% in the same period. Overall, personal loan inquiries jumped 12.3% year over year.
  • Personal loan inquiries grew even as offered APRs rose year over year across every credit score band we tracked. Consumers with a fair credit score between 580 and 619 saw the biggest jump, with the average offered APR 25.7% higher in the third quarter this year than last year. The lowest increase was 0.9% among those with a poor credit score between 560 and 579.
  • Potential personal loan borrowers in North Carolina saw the biggest year-over-year surge in offered APRs. The average APR offered to personal loan borrowers in the third quarter of 2022 was 32.76% — 41.5% higher than the average offered APR of 23.16% in the same quarter in 2021. The next biggest year-over-year jumps were in Virginia (22.1%) and Alabama (17.7%).
  • Maine residents looking to borrow personal loans saw the best improvements in offered APRs. Pine Tree State residents didn’t receive the lowest offered APRs — four other states had a lower average offered APR in the third quarter of 2022 — but they saw the biggest year-over-year drop, from 26.03% to 19.94% (down 23.4%). The next biggest year-over-year dips were in Oregon (20.8%) and Arkansas (19.5%).
  • Regardless of the state, potential borrowers with a good credit score between 680 and 719 sought personal loans in increased numbers. The biggest jumps in inquiries among people in this credit range were in Iowa (41.3%), Oklahoma (40.8%) and South Dakota (38.8%). Inquiries among borrowers in this range rose the least in Delaware (6.3%), Georgia (7.0%) and the District of Columbia (8.1%).

Number of personal loan inquiries for debt consolidation up nearly 30% year over year

Among the categories tracked on the LendingTree platform, personal loan inquiries for debt consolidation jumped the most between the third quarters of 2021 and 2022 at 29.1%.

According to LendingTree chief credit analyst Matt Schulz, no one should be surprised that more people are looking at personal loans for debt consolidation.

“Rising interest rates have left millions of Americans scrambling to find lower-interest ways to knock down their debt, and a personal loan can be a great option,” Schulz says. “You won’t get that 0% offer that you’d get from a balance transfer credit card, but for those who might not qualify for one or don’t want another credit card, personal loans can be an option worth considering.”

Consumers take out personal loans for various reasons, including moving and relocation. Personal loan inquiries for moving and relocation jumped 9.8% in the period examined — the only other loan type we tracked that saw an increase.

A January 2022 LendingTree survey found that nearly 40% of Americans were considering moving this year, which could have boosted the need for a related personal loan.

Change in the number of personal loan inquiries by loan type

Personal loan type% change in inquiries from Q3 2021 to Q3 2022
Debt consolidation29.1%
Moving and relocation9.8%
Home improvement-2.5%
Credit card refinance-2.5%
Major purchase-4.1%
Vacation-16.0%
Medical expenses-19.1%
Wedding expenses-22.8%
Car financing-24.5%
Business-39.8%

Source: Analysis of LendingTree internal data

Meanwhile, personal loans for business expenses saw the greatest drop in inquiries (39.8%).

The job market is hot, says Schulz, who notes that fewer people have felt the need to start a business in 2022 than in 2021. In September 2022, the number of businesses applying for employer identification numbers (EINs) was down 0.9% year over year. The other months within the third quarter — July and August — saw year-over-year declines of 4.4% and 1.6%, respectively.

“Interest in entrepreneurship and side hustles spiked when unemployment shot through the roof in the early days of the pandemic, leading to a lot of people looking toward personal loans for business financing,” Schulz says, “However, the job market has changed since then.”

Car financing (24.5%) saw the next biggest drop, likely due to a limited stock driving prices up. When exorbitant prices combine with higher auto loan interest rates, it’s easy to see why many consumers would back off from using a personal loan to buy a new car.

Still, despite the notable drop in personal loan inquiries for business expenses and car financing, inquiries increased by 12.3% on the LendingTree platform between the third quarters of 2021 and 2022.

Increase in personal loan inquiries comes amid rapidly rising offered APRs

Even though average offered APRs rose for each credit score band tracked between the third quarters of 2021 and 2022, personal loan inquiries still rose.

Schulz suspects that consumers are afraid that APRs will only go higher and that loans will only get more expensive if they don’t lock in APRs now.

“It could also simply be that debt is rapidly rising again,” Schulz says. “More debt means more need for consolidation and refinancing, which traditionally means more interest in personal loans.”

Consumers with a fair credit score between 580 and 619 saw the biggest jump in offered APRs for personal loans among the bands we tracked — an increase of 25.7%. The smallest increases were among those with a poor credit score between 560 and 579 at just 0.9%.

This is a wide disparity, despite the credit scores nearly overlapping. Lender behavior may explain this, Schulz says.

“Some of that could simply be that lenders feel that rates for those at the lowest end of the credit spectrum were already as high as the market would bear, while they were more comfortable bumping up the rates on those with slightly better scores,” Schulz says.

You can see how offered APRs changed between the third quarters of 2021 and 2022 for various credit score ranges:

Credit scoreQ3 2021Q3 2022Year-over-year % change
720+15.53%16.49%6.2%
680 to 71922.69%23.45%3.3%
660 to 67927.96%30.95%10.7%
640 to 65931.83%36.78%15.6%
620 to 63937.32%44.79%20.0%
580 to 61954.95%69.05%25.7%
560 to 579105.54%106.53%0.9%

Source: Analysis of LendingTree internal data

Potential personal loan borrowers in North Carolina see biggest surge in average offered APRs; biggest decrease in Maine

Where you live can impact how affordable it is to borrow money using a personal loan. North Carolina (41.5%), Virginia (22.1%) and Alabama (17.7%) experienced the largest year-over-year surges in offered APRs.

The average offered APR in North Carolina in the third quarter of 2021 was 23.16% — the 12th-lowest in the U.S. That figure jumped to 32.76% in the third quarter of 2022 — the 21st-lowest among the states.

On the flip side, Maine (-23.4%), Oregon (-20.8%), and Arkansas (-19.5%) saw the largest year-over-year drop in offered APRs.

More insights are available in the following chart:

Change in average offered APRs by state

RankStateQ3 2021Q3 2022Year-over-year % change
1North Carolina23.16%32.76%41.5%
2Virginia29.00%35.42%22.1%
3Alabama33.01%38.84%17.7%
4Mississippi53.56%62.93%17.5%
5Texas40.17%47.14%17.4%
6California26.81%31.32%16.8%
7Wisconsin47.77%54.15%13.4%
8Nebraska34.30%38.26%11.5%
9New Jersey24.98%27.47%10.0%
10Hawaii37.42%40.20%7.4%
11New Mexico52.17%55.69%6.7%
12District of Columbia20.20%21.44%6.1%
13Michigan38.44%40.71%5.9%
13Florida37.26%39.44%5.9%
15Maryland18.81%19.89%5.7%
16Nevada31.77%33.46%5.3%
17Louisiana41.75%43.89%5.1%
18Washington33.47%34.95%4.4%
19Kentucky40.82%42.49%4.1%
20Vermont19.21%19.84%3.3%
21New York19.85%20.38%2.7%
22Massachusetts20.83%21.29%2.2%
22Wyoming34.02%34.77%2.2%
24Colorado19.63%20.03%2.0%
24Indiana39.27%40.06%2.0%
26Utah46.46%47.35%1.9%
27Georgia24.99%25.45%1.8%
28Pennsylvania22.90%23.14%1.0%
28Missouri46.91%47.36%1.0%
30Illinois23.67%23.80%0.5%
31New Hampshire22.97%22.99%0.1%
32Connecticut20.35%20.34%0.0%
33Idaho46.84%46.51%-0.7%
34Ohio40.08%39.46%-1.5%
35South Carolina39.80%39.04%-1.9%
36Tennessee48.66%47.47%-2.4%
37Iowa19.82%19.23%-3.0%
38Delaware47.85%45.97%-3.9%
39Rhode Island30.28%29.06%-4.0%
40Oklahoma43.04%40.04%-7.0%
41Minnesota37.71%34.89%-7.5%
42Alaska37.87%34.67%-8.4%
43Arizona43.20%38.87%-10.0%
44Montana37.55%33.54%-10.7%
45North Dakota27.09%24.08%-11.1%
46West Virginia18.88%16.71%-11.5%
47Kansas49.37%42.78%-13.3%
48South Dakota28.23%23.99%-15.0%
49Arkansas45.25%36.42%-19.5%
50Oregon31.71%25.11%-20.8%
51Maine26.03%19.94%-23.4%

Source: Analysis of LendingTree internal data

States with the lowest average offered APRs

A large year-over-year drop in average offered APRs doesn’t mean that the state had the lowest APR. For example, Maine experienced the biggest decrease in offered APRs between the third quarters of 2021 and 2022, but the state had only the fifth-lowest average offered APR last quarter (19.94%).

You can compare the lowest and highest offered APRs by state in the chart below:

Average offered APRs by state (lowest to highest)

RankStateQ3 2022
1West Virginia16.71%
2Iowa19.23%
3Vermont19.84%
4Maryland19.89%
5Maine19.94%
6Colorado20.03%
7Connecticut20.34%
8New York20.38%
9Massachusetts21.29%
10District of Columbia21.44%
11New Hampshire22.99%
12Pennsylvania23.14%
13Illinois23.80%
14South Dakota23.99%
15North Dakota24.08%
16Oregon25.11%
17Georgia25.45%
18New Jersey27.47%
19Rhode Island29.06%
20California31.32%
21North Carolina32.76%
22Nevada33.46%
23Montana33.54%
24Alaska34.67%
25Wyoming34.77%
26Minnesota34.89%
27Washington34.95%
28Virginia35.42%
29Arkansas36.42%
30Nebraska38.26%
31Alabama38.84%
32Arizona38.87%
33South Carolina39.04%
34Florida39.44%
35Ohio39.46%
36Oklahoma40.04%
37Indiana40.06%
38Hawaii40.20%
39Michigan40.71%
40Kentucky42.49%
41Kansas42.78%
42Louisiana43.89%
43Delaware45.97%
44Idaho46.51%
45Texas47.14%
46Utah47.35%
47Missouri47.36%
48Tennessee47.47%
49Wisconsin54.15%
50New Mexico55.69%
51Mississippi62.93%

Source: Analysis of LendingTree internal data

Among good borrowers with credit scores between 680 and 719, the number of personal loan inquiries rises in every state

A good credit score can help you qualify for more favorable APRs when applying for a personal loan.

When it came to borrowers with good credit scores between 680 and 719, personal loan inquiries grew regardless of the state where they resided. The states that saw the biggest inquiries increases were Iowa (41.3%), Oklahoma (40.8%) and South Dakota (38.8%).

These three states saw decreases in offered APRs between the third quarters of 2021 and 2022. Savvy consumers with good credit scores were likely looking for smarter ways to pay off their debt, like debt consolidation loans.

Here’s the full state-by-state look:

Change in the number of personal loan inquiries among borrowers with credit scores between 680 and 719

RankState% change in inquiries from Q3 2021 to Q3 2022
1Iowa41.3%
2Oklahoma40.8%
3South Dakota38.8%
4California37.1%
5Michigan36.9%
6Arizona36.3%
7Utah34.3%
8Hawaii32.9%
9Nebraska32.4%
10Oregon31.9%
11Kansas31.7%
12Montana30.5%
13Nevada29.9%
14New Jersey29.8%
15New Hampshire29.3%
16Minnesota28.6%
16Tennessee28.6%
18Missouri26.8%
19West Virginia26.3%
20Florida26.1%
21Texas26.0%
22North Carolina25.6%
22Maine25.6%
24Rhode Island25.0%
24Illinois25.0%
26Pennsylvania24.6%
27Ohio24.4%
28Vermont24.3%
29Maryland23.7%
30Indiana23.1%
31South Carolina22.7%
32Mississippi22.3%
33North Dakota22.2%
34Virginia22.0%
34New Mexico22.0%
36Wisconsin21.5%
37Massachusetts20.3%
38New York19.9%
39Washington19.1%
40Kentucky17.8%
41Alabama17.7%
42Connecticut17.0%
43Arkansas16.5%
44Louisiana15.4%
45Colorado13.1%
46Wyoming13.0%
47Alaska10.2%
48Idaho8.2%
49District of Columbia8.1%
50Georgia7.0%
51Delaware6.3%

Source: Analysis of LendingTree internal data

“Any time that debt increases or interest in various loans grows, it’s hard to pinpoint the cause because it could either be a result of growing confidence or growing difficulty,” Schulz says.

Schulz suspects that this might be more of a sign of struggle. As rising APRs and rampant inflation eat into people’s savings, this shrinks the financial margin for error.

“Sometimes people borrow because they feel confident in their financial situation and don’t mind taking on a little debt, but other times people take on debt because they don’t have any choice,” Schulz says. “They need it to make ends meet.”

Methodology

LendingTree researchers analyzed nearly 5 million personal loan inquiries on our platform in the third quarters of 2021 and 2022 (July 1 through Sept. 30) to calculate year-over-year changes across the following categories:

  • The reasons why potential borrowers seek personal loans
  • Average offered APRs for potential borrowers by state
  • Average offered APRs for potential borrowers with different credit scores
  • The number of personal loan inquiries for potential borrowers with a good credit score between 680 and 719
 

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