Decoding Personal Loan Trends in 2024 and Beyond
Personal loans allow households to fund large expenses by borrowing money for repayment over months or years. As financial conditions improve for many Americans, over 22 million borrowed a cumulative $222 billion in personal loans as of late 2022.
With fintech fueling record low rates just a couple years back, personal loans surged in popularity. But the tide has since turned, with rising interest rates and a potential economic slowdown on the horizon.
As a data analyst, I decided to dig deeper into the most eye-opening personal loan statistics to understand the current landscape and outlook ahead. Leveraging the latest borrowing indicators and metrics, we can decode trends for 2024 to optimize decisions.
Key Interest Rate and Borrowing Stats
- Interest Rates: As of January 2023, the average personal loan APR hit 11.48% according to Federal Reserve data. This figure increased over 2 full percentage points from just 9.39% a year ago.
- Borrowers: Over 22.5 million Americans currently have an outstanding personal loan. Tally grew 33% from 16.9 million in Q4 2017 per TransUnion analysis.
- Balances: Collectively, U.S. borrowers owe over $220 billion in personal loan debt as of December 2022 reports Equifax, breaking 2021‘s record high of $167 billion.
Average APRs on personal loans rose over 2 percentage points in the last year
These stats reveal a few key insights:
- Rising Rates – Interest rates are up over 200 basis points as the Fed battles inflation through policy moves. Further hikes could occur in 2024.
- More Borrowers – Despite higher costs, over 5 million additional consumers took out personal loans in the last 5 years thanks to fintech.
- Record Balances – Strong economic tailwinds and borrowing demand led balances to surge 33% past 2021‘s previous peak.
While higher costs loom, personal loans remain popular to finance large expenses. But will growth trajectories continue as economic headwinds build? Let‘s analyze further.
Fintech Drives Access But Banks Still Issue Most Dollars
Fintech firms led an unprecedented expansion of access to unsecured borrowing. By leveraging algorithms and online platforms, they approved 42% more consumers than traditional lenders in 2021 based on TransUnion data.
However, national banks still issue the most personal loan dollars thanks to lower capital costs.
Share of Personal Loans Issued By Lender (2022)
- National Banks – 43%
- Fintech Lenders – 31%
- Credit Unions – 15%
- Regional Banks – 11%
So while fintech facilitates applications through automation and speed, rate-sensitive borrowers may opt for banks. Of note, credit unions lag in mindshare among younger demographics per Forbes.
National banks issue the most personal loans by dollar volume, but fintech fuels growth
Debt Consolidation Dominates Use of Funds
Across all ages and incomes, the top reason consumers take out personal loans is to consolidate preexisting debts under a fixed rate structure:
Personal Loan Use of Funds (2022)
- Debt Consolidation: 58%
- Home Improvement: 15%
- Medical Bills: 12%
- Auto Repairs: 5%
- Other: 10%Since early 2020, debt consolidation issuance has accelerated while home improvement declined:
Debt consolidation overtakes home projects as the most common personal loan use
Consumers increasingly refinance credit card, auto, and student loan balances using lower-rate unsecured personal loans. Paying off 19% APR credit card debt with a 10% personal loan saves substantially on interest. This debt consolidation calculator models potential savings.
Fintech lenders mold online applications to highlight debt refinancing use cases while banks emphasize lending power. This product design and marketing likely influences the shift towards consolidation lending.
Delinquencies Rise But Pose Little Threat – For Now
Even quality borrowers face larger payments as rates rise on variable personal loans. As of December 2022, TransUnion tracked a 60+ day personal loan delinquency rate of 3.85% nationally – up nearly 30% year-over-year.
But in context, this figure remains far below 5-6% delinquency peaks seen during recessions in 2001 and 2009.
What’s driving the upward trend? After 2020’s lockdown recession, lenders introduced loans with riskier terms to rebuild volumes according to S&P Global. Naturally delinquencies rise in tandem, especially among non-prime borrowers with thin financial margins.
However, predicted 2023 U.S. GDP growth around 1.2% should keep job losses and severely late payments at bay relative to history…for now at least. Barring an unforeseen shock, personal lending distress looks isolated rather than systemic.
Projecting the Personal Loan Landscape Beyond 2023
Reviewing the above personal loan statistics reveals how financial innovation expanded access against the economic boom of the past decade. Fintech marketing and streamlined apps optimized for debt consolidation speak to the consumer mindset.
But testing times may lie ahead in 2024 and beyond:
Economy – Slower growth, recession risks, and job loss could deteriorate borrowing capacity and repayment rates.
Rates – Further Fed hikes could lift variable loan costs for millions in a precarious economy.
Still, savvy consumers can seize opportunities. Seek fixed rates and amortize loans over 3-5 years to lock gains. Consolidate debts when advantageous, or deploy personal loans to support near-term consumption until conditions improve.
Lending streams may narrow if conditions decline, but for now ample affordable capital fuels household finances. Stay keenly aware of economic trends and respond nimbly as a borrower.
Key Takeaways on the State of Personal Loans
- Interest rates increased over 200 basis points since 2021, lifting borrowing costs
- Over 22 million U.S. consumers have unsecured personal loan debt
- Collectively borrowers owe over $220 billion as of Q4 2022
- Banks issue 43% of loans by volume, but fintech enables wider access
- 58% use personal loans for debt consolidation amid rising rates
- Delinquencies grow but remain below recessionary peaks
Armed with the above intel, readers can now optimize personal lending decisions in 2024‘s dynamic economic environment.
