Personal loans, by definition, are loans that are lent to consumers for unspecified purposes. These loans are typically provided to consumers in the form of a lump sum of cash.
Most financial experts, lenders, and financial institutions consider personal loans to be unsecured loans, which means that borrowers aren’t required to offer up their personal assets as collateral in case they fail to hold true to their promises of repayment.
Unsecured loans like personal loans are inherently linked to higher interest rates than their secured counterparts. Further, personal loans are usually awarded for smaller loan requests than other types of loans are.
Personal loans known as installment loans have exploded in popularity in recent years for a number of reasons. First off, considering that the consumer debt market is larger than ever before, lenders have tightened up their requirements on car notes, home mortgages, and other common forms of loans. Personal loans are also more easy to get in today’s financial climate because there are many more places to get them than ever before. Alternative lenders such as check-cashing service providers and lenders of car-title-secured loans have rapidly popped up across the nation in recent years. These lenders are almost always willing to take on the higher risks of making personal loans.
Here are six statistics about the personal loan market in the United States that will give you a better sense of understanding about how big personal loans are in today’s landscape of consumer lending.
1. There are tons of outstanding personal loan accounts
As of the first quarter of 2019, there are some 19.5 million outstanding personal loan accounts in the United States. Since 2016, this number has increased by a factor of 52 percent. Virtually all projections indicate that the number of current personal loan accounts will increase consistently over the next few years.
We don’t know when the market will become fully saturated, though the increase in personal loans extended by lenders in the United States will come to an end at some point. Just know that this isn’t likely to happen in the next two or three years.
2. Personal loans are increasingly being awarded to subprime lenders
Subprime borrowers are those who aren’t considered to be optimal consumers to grant loans to. The definition of “subprime” changes based on market conditions, though people under a certain credit score are usually thought to be subprime borrowers.
The number of bad credit personal loan applications submitted to American lenders for personal loans by subprime borrowers rose about 30 percent from mid-2017 to mid-2018. A major reason for this is that low-income areas are seeing a massive influx of alternative lenders that are largely the only ones willing to extend credit to subprime borrowers.
3. How many Americans take out personal loans?
In 2018 alone, more than one-third of Americans successfully took out personal loans. In other words, that’s more than 83 million people.
The number of Americans who take out personal loans is certain to keep growing over the next few years. As demand grows, expect interest rates to rise on the average personal loan.
4. Why do people seek out personal loans?
Current statistics indicate that some three-tenths of personal loans are used for expenses related to motor vehicles, including the initial purchase of cars or trucks.
This use will likely hold true as the most popular in the future.
5. People pay this much each month to satisfy personal loan debts
In the United States, according to information taken from the fourth quarter of 2018, the average person’s monthly payment to satisfy personal loan debts was $353.
As personal loans become more popular, this statistic is guaranteed to increase. Eventually, this growth will plateau, but it isn’t clear when such a peak will be reached.
6. This is how approval rates looked in 2017
In 2017, about three-quarters of personal loan applicants were denied. Although this number seems high, it doesn’t mean that most people were unsuccessful in securing personal loans.
Since most people apply for personal loans with multiple lenders, the usually do, in fact, end up getting them. The proportion of approvals to denials in the world of personal loans could increase in the future as a higher proportion of the American population adopts regular Internet usage behavioral patterns.