TransUnion: Personal Loan Popularity Will Increase in 2016
Jan 27th, 2016 @ 8:32 PM by Amber Nelson
The number of personal loans has risen dramatically in the past two years and is expected to grow through 2016, according to new data from TransUnion, a sign of both an improving economy and limited available home equity.
“During and immediately following the Great Recession, consumer demand for both secured and unsecured personal loans grew,” said Jason Laky, senior vice president and consumer lending business leader for TransUnion in its first ever personal loan forecast. “As new, well-funded online lenders and ‘fintech’ startups entered the market, personal loans had a broader appeal for consumers across all risk tiers.”
The popularity of personal loans has increased as many Americans either lost their homes to foreclosure or lost all or most of their home equity after the recession. Without access to home equity lines of credit, consumers started looking for other financing options.
Since the third quarter of 2013, the number of personal loan has skyrocketed 18 percent, from 22.5 million to 27.34 million at the end of the 2015 third quarter. Unsecured personal loan balances now total $82.52 billion and secured loan are up to $165.46.
And TransUnion is betting that those totals will grow throughout this year. Unsecured loan balances are predicted to rise 5 percent by the end of 2016 to an average of $7,599 per customer, up from $7,235 in 2015. TransUnion also expects secured loans to increase slightly to $17,904 per customer by the end of 2106, up from $17,411 in 2015.
Americans are feeling more confident in their jobs and in their ability to pay for luxuries, TransUnion says. “When the economy is stronger and consumers have more disposable income, consumers are more likely to purchase larger items, such as boats or motorcycles, using secured loans,” said Laky. “The low unemployment rates of recent years, coupled with continued low delinquencies, indicate secured loans will continue to be an important financial product for consumers in the coming year.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.