Personal Loans

Personal Loan Statistics

Personal loans are quickly becoming one of the more popular ways to borrow money among U.S. consumers. What Americans owe on personal loans has more than doubled in the past five years, from $55.7 billion in 2012 to $125.4 billion in mid-2018.

With personal loans on the rise, the numbers behind these trends can reveal how borrowers are using these loans — and how they are impacting their finances. See these personal loan statistics to get a deeper look at this form of debt.

Key facts

  • Outstanding personal loan debt is $125.4 billion.
  • Personal loans make up 1.5% of outstanding consumer debt and just under 5% of outstanding non-mortgage consumer debt. For comparison, outstanding credit card debt stands at over $1 trillion and comprises 7.1% of outstanding consumer debt.
  • Consumers have 19.5 million outstanding personal loans, an increase of 52% over the past 3.5 years.
  • The average origination amount of personal loans taken out in 2018 is $10,575.
  • Over 60% of borrowers take out a personal loan to consolidate debt or refinance credit cards.
  • The average APR for personal loans taken in 2018 is 33.52%, but rates vary drastically for borrowers with different credit profiles.
  • The most popular term length is three years. More than half of all borrowers using LendingTree are seeking 36-month loans.
  • Unsecured personal loans have higher default rates than other common loan types, with personal loan delinquency rates (60 days or more past due) at 3.21%.
  • One percent of American families applied for personal or family loans in 2017, and 24% of those received at least one denial for their requested loan amount.
  • Members of Generation X take out the largest loans, with an average amount of $9,522.

Sources: TransUnion (here and here), LendingTree (and customer data), Federal Reserve

Outstanding personal loans

The outstanding balance of personal loans owed in the U.S. is $125.4 billion, the highest it’s been in the past 12 years for which we have data.

Here’s an overview of what Americans have owed on personal loans during that time.

Personal loans were more popular before the Great Recession, with balances peaking in 2007 at $71.9 billion. Outstanding personal loan balances dipped below that level for the next seven years before reaching a new high of $88 billion in 2015. The amount that Americans owe on personal loans has risen every year since.

Source: The Wall Street Journal

How personal loans compare to other consumer debts

Personal loans make up a small share of consumer debt held by Americans. Here’s a breakdown of how outstanding balances on personal loans compare to other forms of debt, both in 2008 and in 2018.

Note: Balances are reported from the Federal Reserve and may not match the TransUnion figures cited above.

Source: LendingTree, Federal Reserve

Personal loan delinquency rates

The delinquency rate (60 days or more past due) for personal loans is 3.21%, which is higher than those for mortgages (1.67% delinquency rate), auto loans (1.22%) and credit cards (1.53%).

But the personal loan delinquency rates are fairly low when compared to historical numbers — these hit a high of 5.1% in 2009, the peak of the Great Recession.

Source: TransUnion

Personal loan rates and balances by borrower credit score

The average personal loan rate extended to borrowers in 2018 was 33.52% APR, according to LendingTree customer data. The average size of a loan extended in 2018 was $10,575.

But when looking at average personal loan rates by credit profile, what’s offered can range from 7.09% APR up to 135.94% APR. Additionally, our personal loan offer study revealed that offered APRs vary widely, with the average difference of 8.79% between the lowest and highest offered rates.  Credit scores also correlate closely to loan balances, as borrowers with higher scores take on larger personal loans than those with lower scores.

Source: LendingTree customer data

Reasons why people take out personal loans

Personal loans can be used for almost any purpose, from paying for eco-friendly home improvements to paying for medical expenses. But the most common reason for seeking a personal loan is to manage debt.

Sixty-one percent of LendingTree customers seeking a personal loan planned to use it for debt, with 21.8% using it to refinance credit card balances and 39.2% seeking a loan for general debt consolidation. The next most popular uses for a personal loan are paying for home improvements and making a major purchase.

Here’s a breakdown of the average balances and credit scores for personal loans, based on the stated reason for borrowing.

Source: LendingTree customer data

Terms lengths sought by borrowers

A three-year term is the most popular length of a personal loan, preferred by more than half of personal loan shoppers. Here’s a look at how loan terms match applicant’s credit scores and requested loan amounts.

Source: LendingTree customer data

Breakdown of personal loans by borrower generation

Personal loan borrowers also have some differences when comparing by age.

In particular, rates of personal loan delinquency fall steadily from the youngest group, Generation Z at 5.6%, to baby boomers (2.4%) and the silent generation (2.5%). This could reflect steadier incomes and financial situations among older borrowers, as well as better debt management and repayment habits.

Personal loan balances follow a different pattern, with the highest balances held by the middle generation. Gen Xers have the highest average loan balance, at $9,522. The lowest average balances are held by members of Generation Z ($3,258) and the silent generation ($6,885).

Source: TransUnion

Conclusion

Personal loans are becoming more popular, thanks in large part to greater access through financial technology companies, online lenders and improved offerings. They can be an effective tool for borrowers to consolidate debt, refinance to lower rates and finance major purchases.

But this rise in popularity is relatively new for personal loans, and this credit type has some dangers, as proven by its higher rates of delinquency. And as applicants’ credit scores drift down, rates quickly shoot up and make personal loans a costly way to borrow. Many borrowers also use a personal loan to consolidate credit card debt, for example — only to turn around and once again run up balances.

These personal loan statistics underline how important it is for borrowers to practice caution and wisdom when using this product. Borrowers who use this product can come out ahead, but only if they weigh the decision, find a favorable personal loan and practice responsible debt management.

 

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