Personal loans are a popular and versatile form of borrowing. With the rising interest in the topic, many are curious about the facts and figures behind these loans – hence, our roundup of the most interesting personal loan statistics of 2023.
Personal loans can help you finance anything from a home renovation to a wedding or consolidate your high-interest debts into one lower monthly payment.
To shed light on this, we’ve gathered the latest personal loan statistics to give you a comprehensive picture of the personal loan landscape in the US, focusing on rates, debt, and usage, as well as borrower characteristics, lender types, loan purposes, and more.
- Personal loan debt in the US has been steadily increasing over the past decade, reaching a total of $519.5 billion.
- The average interest rate on a personal loan in the US is around 9.5%.
- The most common reasons for taking out personal loans in the US are debt consolidation, home improvements, and major purchases.
- Baby boomers have the largest average personal loan debt in the US, with an average balance of $21,644.
- Washington State has the highest personal loan balance in the US, with an average balance of $30,648.
- Fintech companies have become a major source of personal loans in recent years.
Total Personal Loan Debt in the US
Americans own more personal loan debt today than ever before. Total personal loan debt peaked at $519.5 billion in the third quarter of 2022, a 19% increase from the previous year. Most of this growth came from unsecured loans, which increased by 33.2% compared to 12.9% for secured loans.
After many years of low-interest rates in the United States, consumer credit (especially credit card debt) has become quite expensive. Most of these debts have variable interest rates, which means they get costlier as base lending rates rise. As such, many consumers are consolidating debt with personal loans, which are often a better alternative than the ever-increasing variable APR of revolving debt.
What Percentage of Americans Have Personal Loans?
In the first quarter of 2023, 22.4 million Americans had unsecured personal loans.
More people have personal loans than ever before. Two million more consumers obtained unsecured personal loans in the first three months of 2023 than in the same period in the previous year.
The number of unsecured loans held by Americans remains consistently higher than that of consumers with those loans. 26.9 million unsecured personal loans were outstanding in Q1 2023 against 22.4 million holders. The story has been the same across the past four years. This indicates that many consumers have more than one personal loan.
What Percentage of All Consumer Debt Is Personal Loans?
Consumer debt, more commonly called household debt, is the total amount of debt that all members of a household owe. Personal loan debt accounts for a small share of consumer debt – about 1.6%. Total household debt in the US hit a historic $17.04 trillion in Q1 2023, while personal loan debt was only $26.9 million. Mortgages make up the largest share of household debt at 72.7%.
Where Are People Getting Their Personal Loans?
Most Americans obtain loans from financial technology (fintech) institutions. This development did not happen overnight. Fintech has been growing as the preferred source for personal loans over the years. In 2013, banks gave out 40% of all personal loans compared to only 5% for fintech. By 2018, only 28% of all personal loans in the US originated from banks, with 38% coming from fintech.
📚 Learn more: Looking to explore the best personal loan options? Our recent post serves as a reliable compass.
One of the primary reasons for this development is that fintech companies offer convenient, fast, and simple ways to obtain loans online, often at lower interest rates than traditional lenders. Many fintech lenders do not assess potential borrowers using legacy methods. Instead, they use alternative data and improved forecasting models to determine the creditworthiness of borrowers, reaching segments of the population that may have limited access to traditional sources of credit.
Average Personal Loan Interest Rate
The average interest rate offered on personal loans by commercial banks is 11.48%.
This rate has been increasing steadily for the past three quarters. After falling to 8.73% in Q2 2022, the rate has been trending upward, reaching the current high of 11.48% in Q1 2023.
📚 Learn more: Find out more about what credit score you need for a personal loan.
Average Personal Loan Interest Rates by Credit Score
Credit scores have an enormous impact on personal loan interest rates. Borrowers with credit scores in the 720+ credit score range can pay between 10.73% and 12.50% interest on personal loans. You’d pay interest as high as 32% if your credit score falls below 630.
|Credit score||Average loan interest rate|
Interest rates vary across lenders, with credit unions offering the cheapest rates (as low as 7.74%). Online lenders (fintech companies) charge interest as high as 35.99%.
Average Personal Loan APR
Like interest rates, personal loan costs vary based on various factors, but credit score and type of lender are the most critical. The true cost of a loan is indicated by the annual percentage rate (APR), a figure that considers interest rates and other fees imposed on a loan.
Unsurprisingly, borrowers with good credit scores enjoy cheaper personal loans. Borrowers in the 720+ range have an average APR of 14.34%.
The opposite side of the credit score is painful, with borrowers with poor credit scores shouldering a total cost of more than one and a half the value of the borrowed amount (165.30%). This is largely because borrowers with low credit scores are only eligible for payday loans and other high-interest loan products.
📚 Learn more: Curious about the wisdom of taking out a personal loan? Read our objective analysis to answer the question, “Is Getting a Personal Loan a Good Idea?“
Personal Loan Debt
Personal loan debt is a small but growing percentage of overall consumer debt.
What Is the Average Personal Loan Amount?
Like interest rates, the average loan amount per borrower varies across credit score ranges. The average personal loan amount for borrowers with a credit score of 720 or higher is $19,658. Borrowers with a credit score of 560 or less take out personal loans in the amount of $2,568, on average.
Disregarding the variations based on credit scores, the average debt per borrower as of Q1 2023 was $11,281. This means the average borrower in Q1 2023 could obtain more personal debt than two years ago when the average amount was $8,817.
🚶 Learn more: Learn the fundamental steps for taking out a personal loan in our detailed discussion, ‘How to Take Out a Personal Loan in 8 Steps,’ and make informed financial decisions.
Personal Loan Delinquency Rate
The personal loan delinquency rate is 3.91%, meaning that 3.91% of all personal loan borrowers are 60 days or more late with their payments.
This is a sharp increase from two years ago when the government imposed a moratorium to help the average consumer navigate the economic turbulence introduced by the coronavirus pandemic. There were still fewer delinquent borrowers in Q1 2023 than in Q4 2022.
Who is using personal loans, and how much are different generations borrowing? Read on for answers.
What Generation Uses Personal Loans the Most?
A study by Experian shows that Baby boomers have the largest average personal loan debt ($21,644), nearly 92% above the national average. The second largest personal loan debt carriers are Generation X ($20,677), then the Silent Generation ($18,211).
Why is it that older Americans own the highest average personal loan balance? One explanation could be that many of these individuals are already retired (or nearing retirement) and may need personal loans to cover unexpected expenses, such as home repairs, travel costs, or medical bills. These individuals also typically have higher incomes and better credit scores than younger Americans, so they are able to borrow more.
Younger Americans are accumulating more personal loan debt. The average personal loan balance for Gen Z in 2022 increased by 15.4%, over 6% more than Gen X or 9% more than Baby Boomers. This may be because, as this generation ages, it has generally better access to credit.
Which States Have the Highest Average Personal Loan Balances?
Washington State has the highest personal loan balance ($30,648), a position it retains for the second year running. In fact, the top five high-balance states were the same in 2022 as in 2021. Only North Dakota switched places, from position five in 2021 ($23,409) to third in 2022 ($27,856).
|District of Columbia||$12,241.00||$12,250||0.10%|
North Dakota is second among states with the fastest-growing average personal loan balances (19%). It is outdone by Hawaii (20.1%) but ahead of South Carolina (12%) and Minnesota (10.8%).
What Do People Use Personal Loans For?
Most borrowers seek personal loans to consolidate existing debt (38.0%), followed by credit card debt refinancing (17.7%). Simply put, more than half of borrowers (55.7%) pursue personal loans to pay down debt.