Understanding personal loan statistics is crucial for informed financial decision-making. These statistics provide valuable insights into borrowing trends, interest rates, repayment patterns, and default rates. By analyzing this data, you can make well-informed decisions about whether to take out a personal loan, how much to borrow, and what terms to agree to. It allows you to assess the risks involved and choose the most suitable loan option that aligns with your financial goals and capacity to repay. In essence, being aware of personal loan statistics empowers you to make responsible and economically sound choices in managing your finances.
Currently, personal loan debt continues to surge. Keep reading to learn about recent personal loan statistics and trends with Wise Loan. Get insights for more brilliant borrowing today.
What are Personal Loans?
Personal loans are a type of financial arrangement where you borrow a specific amount of money from a lender, typically a bank or credit union, with the understanding that you will repay the borrowed amount over a predetermined period. These are unsecured loans, meaning they do not require collateral. They are often used for various personal purposes such as debt consolidation, home improvement, education expenses, or unexpected medical bills. One notable feature of personal loans is their relatively quick approval time, making them an attractive option for those in need of fast financing. Personal loans come with fixed or variable interest rates, and the terms and conditions can vary based on the lender and the borrower’s creditworthiness. Unlike credit cards, personal loans offer a lump sum of cash upfront, making them a popular choice for individuals looking to finance specific projects or cover unplanned expenses.
Key Personal Loan Statistics
Personal loan debt surged in 2023. The most current available data reveals the following key facts about interest rates, average loan amounts, average personal loan terms, and average rejection rates:
- Interest Rates: Based on findings from a Bankrate study, we note that the typical interest rate for personal loans stands at 11.56% as of January 3, 2024. Yet, it’s essential to understand that the actual rate you might be offered can vary, either higher or lower, reflecting the specific nuances of your financial situation. The following chart breaks down the interest rates by credit score range:
|
CREDIT SCORE |
AVERAGE LOAN INTEREST RATE |
| 720–850 | 10.73%-12.50% |
| 690–719 | 13.50%-15.50% |
| 630–689 | 17.80%-19.90% |
| 600–629 | 28.50%-32.00% |
- Average Loan Amounts: As of the third quarter of 2023, the average personal loan debt per borrower stands at $11,692. This is up from the average of $10,749 a year before, indicating that borrowers are taking on slightly more debt on average.
- Average Personal Loan Terms: The following table shows the intermediate personal loan term by credit score range. Borrowers with the worst credit received the shortest terms.
| CREDIT TIER (SCORE) | LOAN LENGTH |
| Subprime (300-600) | 16 months |
| Near Prime (601-660) | 29 months |
| Prime (661-720) | 46 months |
| Prime Plus (721-780) | 57 months |
| Super Prime (781+) | 68 months |
Source: TransUnion. Data is for loans originated in Q2 2023
- Average Rejection Rate: According to data from the Federal Reserve Bank of New York, in the 12 months concluding in June 2023, 21.8% of individuals seeking credit of all kinds faced rejection. This means that over 1 in 5 applicants for credit cards, mortgages, auto loans, or other forms of credit were denied. This represents the most substantial rate of denial witnessed in the past five years, as reported by the NY Fed.
Personal Loan Facts
Here are some interesting and lesser-known facts about personal loans dealing with total debt, market size, amount of indebtedness, and delinquency rates:
- Total Debt: Americans currently owe a staggering $241 billion in personal loan debt. This marks a significant increase from $232 billion in the previous quarter and $210 billion a year earlier, indicating a 3.9% quarter-over-quarter jump and a 14.8% rise from the prior year. The trend is clearly upward, showing a growing reliance on personal loans.
- Number of Borrowers: The count of Americans with personal loans has risen to 23.2 million as of the third quarter of 2023, up from 22.0 million a year earlier. This 5.5% year-over-year increase suggests that more individuals are turning to personal loans, reflecting evolving financial needs or conditions.
- Proportion of Debt: Personal loan debt constitutes 1.4% of all outstanding consumer debt as of the third quarter of 2023. When focusing on non-housing consumer debt, it represents 5.0%. For context, Americans owe $1.079 trillion in credit card debt, making up 6.2% of total outstanding debt. These figures provide a comparative view of personal loans within the larger debt landscape.
- Delinquency Rate: The delinquency rate for personal loans, indicating payments 60 days or more past due, is at 3.75% as of the third quarter of 2023. This is a decrease from 3.89% a year ago, suggesting an improvement in repayment behavior despite the increase in loans.
- Purpose of Loans: A majority of borrowers, 52.9%, are utilizing personal loans to consolidate debt or refinance credit cards. The second most common use is for home improvements, accounting for 7.5%. These statistics shed light on the primary motivations behind borrowing.
Personal Loan Trends
The following are some of the most important trends impacting the personal loan industry. These trends touch upon the roles of automation, cloud-based platforms, AI-mediated loans, and the demand for hyper-personalized service:
- Full Automation: In the loan application process, applicants prioritize speed and efficiency, valuing quick completion and rapid decision-making. With the urgency of funds and alternative options just a Google search away, consumers, particularly the tech-savvy, prefer to avoid visiting branches or handling paperwork, seeking immediate online solutions instead.
- Cloud-Based Lending: The banking sector is gradually embracing cloud technology, though it’s still in the nascent stages. Cloud lending platforms offer scalable, flexible, and secure solutions to launch new services and products, fostering innovation swiftly. They also automate loan processing, securely handle documents, and reduce fraud and theft risks.
- Personalized Service: In the digital age, financial institutions must go beyond essential personalization to engage and retain customers, who now demand tailored experiences and relevant offers. Incomplete applications still provide valuable insights, which can be leveraged to present hyper-personalized proposals, enhancing customer loyalty and boosting revenue. Please do so to ensure better conversion rates and satisfied customers.
- AI-Driven Lending: Artificial intelligence is transforming the loan approval landscape, with algorithms and machine learning enabling financial institutions to transcend conventional approval criteria. Utilizing AI-driven lending tools allows online lenders to accurately identify suitable customers, expedite comprehensive lending decisions, and enhance the overall customer journey. The adoption of artificial intelligence offers immense potential for boosting customer acquisition and increasing revenue.
- Environmental, Social, and Governance Lending: ESG lending is increasingly shaping consumer choice in financial institutions, as many prioritize ecological and ethical commitments, with over 75% preferring companies advocating for such issues. Banks that incorporate sustainability-linked loans invest in ESG-friendly technology, and transparently address concerns like carbon emissions and gender wage gaps are positioned to gain a competitive edge. This ethical focus, once a concern for more giant corporations, is now a critical factor in customer-bank relationships.
What Personal Loan Borrowers Can Expect in 2024
In 2024, borrowers will navigate a landscape where personal loan rates have generally increased, not just for personal loans but across consumer lending products like mortgages, student loans, and credit cards. Those looking to consolidate credit card debt might find relief in personal loans, which offer lower rates, like the current rate for two-year loans, and the stability of fixed rates and payments. However, alternatives like balance transfer cards or secured loans should be considered cautiously, balancing potential savings against risks like losing collateral. Overall, with rising interest rates, prudent borrowing, and credit use are more crucial than ever. Knowing this can help you stay prepared for upcoming changes and opportunities in the market.
Apply for a Loan with Wise Loan
Wise Loan emerged as a prominent personal loan lender, celebrated for its streamlined, user-friendly application and rapid approval process. We understand that when it comes to financial assistance, time is of the essence. That’s why we’ve designed our services to be as accessible and efficient as possible, ensuring you get the support you need without unnecessary delays. With Wise Loan, you benefit from competitive rates, flexible repayment options, and a transparent lending process that puts your needs first. Whether you’re consolidating debt, funding an unexpected expense, or investing in a personal project, Wise Loan is committed to providing a solution that aligns with your financial goals. Don’t let complexity deter you from your economic aspirations. Start your application today and discover the simplicity and reliability of borrowing with Wise Loan. Experience the difference with a lender that understands and values your financial journey. Join the many who’ve found their financial solution with us and apply for a loan today!
References
Bankrate: What’s the average personal loan interest rate?
LendingTree: Personal Loan Statistics: 2024
Transunion: Unsecured Personal Lending Industry Insights Report
Federal Reserve Bank of New York: SCE Credit Access Survey
Temenos: 5 Trends Reshaping the Lending Industry
The recommendations contained in this article are designed for informational purposes only. Essential Lending DBA Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.
