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Inquiries from Prospective Personal Loan Borrowers Highest Since Pre-Pandemic
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The number of personal loan inquiries on the LendingTree platform during the week of April 24 was the highest since before the coronavirus pandemic, according to the latest data from our Personal Loan Index. But the number was still about a fifth lower than the first full week of January 2020 when the index was first tracked.
“Rampant inflation, rising interest rates and a gradual return to spending like we did before the pandemic means that more and more people are likely finding themselves with tighter budgets and smaller financial margins for error,” says Matt Schulz, LendingTree chief credit analyst.
Here’s what else the Personal Loan Index showed.
Personal loan inquiries up, requested amounts down
The increase in the number of personal loan inquiries was even more pronounced among prospective borrowers with credit scores of 720 or higher. Inquiries during the week of April 24 from these prospective borrowers were double that of pre-pandemic levels — and nearly five times above their low point in December 2020.
But while inquiries were up, requested amounts were down. Outside of three weeks in December 2021, requested amounts during the week of April 24 were the lowest since before the COVID-19 crisis. (During the week of April 24, the average requested amount was $8,951, compared with a range of $7,394 to $8,932 during those three December 2021 weeks.) And there was a pretty steep week-over-week drop before April 24, with the previous week almost level with pre-crisis figures.
Similar to rising inquiries, decreasing amounts were more prominent among prospective borrowers with credit scores of 720 or higher. That demographic during the week of April 24 was only asking for 40% of what it did pre-pandemic — $8,258, versus $20,878 the first full week of January 2020.
While some might expect loan amounts to rise during a pandemic — when more people might need these funds to keep afloat — this trend makes sense, Schulz says.
Is now a good time to get a personal loan?
If you’re in a position where you need a personal loan, you’re in luck, Schulz says.
A personal loan can be a great way to reduce the interest you pay while consolidating a bunch of disparate debts and streamlining the number of payments you have to make each month.
In general, the better your credit score, the lower the interest rate for which you can qualify — relative to the rates being offered when you apply. So if you have a high score (for example, 720 or better), you’re going to be in a better position than those with lower scores.
Ultimately, there are many reasons to get a personal loan. According to the Personal Loan Index data, major purchases were the most common reason people sought loans the week of April 24 (tied with the week of Christmas in 2021 for the highest since before the crisis).
And personal loans for businesses remained above pre-pandemic levels for the fifth week in a row, while those for home improvements were about even with pre-pandemic levels. Meanwhile, personal loans for credit card refinancing and debt consolidation were down compared to before the pandemic — though the levels were identical to those seen at the pandemic’s onset.
You can’t always predict you’ll need a personal loan. So if you can’t take advantage of the lower rates now, it’ll be even more important to make sure your credit is in good shape when you apply. And, as with any financial product, you should only take out the amount you need and consider alternative options to ensure you’re getting the best deal available to you.