Key facts
- Personal loans are the fastest-growing consumer debt product, with outstanding debt tripling from $49 billion in 2010. Outstanding personal loan debt is $156 billion, as of Q3 2019.
- About 20.2 million consumers have a personal loan, and the average new personal loan size was $6,382.
- Personal loans represent about 1% of outstanding consumer debt. In comparison, outstanding credit card debt is about $881 billion and comprises over 6% of outstanding debt.
- More than 65% of borrowers take out a personal loan to consolidate debt or refinance credit cards.
- Delinquency rates (60 days or more past due) for personal loans is currently 3.3%, which is higher than mortgages (1.5% delinquency rate), auto loans (1.4%), and credit cards (1.8%).
- In 2017, 5% of American consumers applied for personal loan from a bank, and 38% of those received at least one denial for their requested loan amount. Just 1% of consumers asked friends and family for a loan and 24% of them were turned down.
Sources: LendingTree (and customer data), Federal Reserve Bank of New York, TransUnion.
Table of contents
How much personal loan debt is there?
The outstanding balance of personal loans owed in the U.S. is $156 billion, the highest it’s been in the past 14 years for which we have data.
Here’s an overview of what American consumers have owed on personal loans during that time.
How many people have personal loans?
About 20.2 million Americans currently carry a personal loan, an increase of nearly 6 million people in the last five years.
personal loans have grown by double digits each year.
How fast are personal loans growing?
Personal loans are the fastest growing segment of the consumer debt market, with outstanding loan balances nearly tripling in the last 10 years. Following a dip during and right after the Great Recession, personal loans have grown by double digits each year.
How do personal loans compare to other consumer debts?
Personal loans continue to make up the smallest sliver of consumer debt held by Americans, despite their growing popularity.
What are the personal loan delinquency rates?
An estimated 3.3% of personal loan accounts are 60 days or more past due, which is higher than mortgages (1.5% delinquency rate), auto loans (1.4%), and even more than the number of credit card accounts that are at least 90 days past due (1.8%).
have loan offers extended to them. Below, you can see the average APR (which includes the interest rate plus fees) for borrowers based on credit profile.
What is the average APR for personal loans?
On average, prime borrowers (typically those with scores of 640 and above) see interest rates that are competitive with the credit card interest rates they would receive. But subprime borrowers — who may not be eligible for other credit — generally have to pay incredible premiums on their personal loans, if they even have loan offers extended to them. Below, you can see the average APR (which includes the interest rate plus fees) for borrowers based on credit profile.
Not only do offered APRs vary between consumers, but we find that the same consumers see vast differences between the best and worst offers they see on our site. This implies that prime borrowers could potentially save between about $1,500 and $3,700 on a three-year loan by shopping for the lowest interest rate available to them in the marketplace.
Why do people take out personal loans?
Personal loans can be used for almost any purpose, from paying for eco-friendly home improvements to covering medical expenses. But the most common reason for seeking a personal loan is to manage debt.
More than 65% of LendingTree customers seeking a personal loan planned to use it for debt, with 31% using it to refinance credit card balances and 36% seeking a loan for 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.
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 the 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, interest 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 personal loans can come out ahead, but only if they weigh the decision, find a favorable personal loan and practice responsible debt management.
Shen Lu contributed to the reporting for this article.
