Need Extra Money? Many Make it Personal

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February 3, 2016 by Harry Stoll

 

American consumers are finding it easier than ever to take out personal loans. Personal loans are usually utilized by consumers to pay down high interest credit cards, pay off medical debt, or to purchase large household items. Two new studies indicate American consumers are taking full advantage of their options in the personal loan market.
Bankrate.com found roughly 24 million Americans, or almost 10% of the U.S. population, expect to take out a personal loan in the next year. A report from TransUnion found the dollar volume of unsecured personal loans is growing 25% a year. They also found that the number of Americans currently paying off a secured or unsecured loan increased 18% between the third quarter of 2013 and the same period last year.
According to TransUnion, unsecured personal loans jumped 25.3% to $85.5 billion in the 3rd quarter of 2015. Secured personal loans rose 10.6% to $165.5 billion year over year in the 3rd quarter of 2015. This is the first major increase in personal loan amounts since the recession hit in 2008.
The improving American economy partly explains why Americans are willing to take on additional debt. In the past couple years, consumers have enjoyed some job and wage growth. Still, 3 out of 10 Americans have no money set aside in a rainy day fund for emergencies. A personal loan is attractive to young consumers particularly since most have an income, but may not have savings.
However, the biggest reason for the surge in personal loans is due to the availability of credit. As most banks scaled back their consumer lending after the financial crisis in 2008, a few dozen online players filled this ‘lending void.’Many of these new players will approve a loan application in a matter of minutes. These new types of online personal loans are easy to get, it’s done entirely on the internet, there is transparency, and there is no need to talk with anyone.
The interest rates on personal loans can vary widely. Lending Club charges APRs between 5.32% and 28.99%. Social Finance charges APRs between 4.73% and 12.49%. Avant’s APRs range from 9.99% to 36%. Consumers applying for these personal loans often will qualify for lower interest rates than are being charged on their credit cards. These personal loans have filled the gap created by the virtual disappearance of home-equity loans when home prices tanked and many homeowners found themselves underwater on their mortgages in 2008-2009.
More than half of all personal loans are utilized by consumers to consolidate existing expensive debt. According to TransUnion the average balance on an unsecured loan is expect to increase 5% this year to approximately $7,600. The average balance on a secured loan is to rise 2.8% to $17,904. They anticipate the delinquency rates for these loans to remain stable at around 3.5%.
The recession hit some Americans hard, and they racked up some expensive debt. Taking out a personal loan now with lower interest rates and less expense will help these Americans dig out of debt faster, or purchase those large household items they’ve been putting off until they could afford to pay for them. Purchasing these larger ticket items and reducing the cost of debt will help our economy rebound ever faster.

 

Founded in 1950, United Credit Service, Inc. is a full service, licensed revenue cycle management and debt collection agency in Wisconsin providing effective, customized one on one management and recovery solutions for our business partners. Visit our website at http://www.unitedcreditservice.com, call 877-723-2902 or check out our YouTube video.

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