According to Lending Tree, U.S. consumers’ debt balances are increasing, and with more Americans borrowing money, the appeal of personal loans has also grown. Statistics show that the number of outstanding personal loan is about 20 million currently, with a balance of over $125 billion. There is certainly an increase in personal loans – about two times more owed today than five years ago.
In the last three years, there was a 50 percent increase in outstanding loans. The key points Lending Tree found were these:
- Getting a handle on existing debt is the most popular reason people get a personal loan. In fact, 61 percent of all loans were to get a handle on debt – 39 percent were for debt consolidate with another 22 percent were for credit card refinancing.
- Consumers who get personal loans to get a handle on their debt are requesting for high origination amounts - $10,000 or more.
- About 15 percent of loans were noted as being other with home improvement and renovations marking the fourth most popular reason to get a personal loan (7.7 percent of all loan requests).
- People in the New England area are using loans more to manage debt with residents of Arkansas, Louisiana and Mississippi being least likely to do this.
- Washington, D.C. has the highest number of offbeat loan requests such as moving, business-related expenses, weddings, etc.
- West Virginia is the number one state where borrowers are asking for money for home improvements.
- Wyoming is the number one state where residents are asking for personal loans to take care of medical bills.
Do Personal Loans Affect Your Credit Score?
Anytime you take out a personal loan, your credit score takes a hit. Lending Tree found that most “other” category personal loan borrowers had low credit scores (600 or below). They are often seen as an alternative option to payday loans to cover in times of emergencies or everyday expenses.
People with bad credit are often using these loans for their moving expenses too, which means they’re trying to relocate to locations with a better opportunity and don’t have a lot of money to move on.
People with credit scores between 600 and 750 are often getting a personal loan to consolidate their debt or refinance the balances on their credit cards. People with excellent credit scores of 750 or higher are using personal loans for bigger priced items such as home buying, home improvements and renovations, major purchases, etc.
Basically, what Lending Tree found was that most people are using personal loans to get a handle on their debt – to give themselves more financial freedom in the long run.
Read More:
Iowa Payday Loan Law and Legislation. According to the laws of Iowa a borrower is not allowed to get more than $500 loan.
