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Personal Loans Favored Over Other Lending Products

Unsecured loans, such as consumer loans by, are quickly making its way on top the consumer loan market. Investors for the past decade have channeled billions of dollars onto the industry of personal loan in the form of different bond structures, venture capital, and even directly investing in loans. Driven by this inflow of capital as well as several ingenious technologists, the industry of personal loans that was then stagnant has now hit the roof with growth rates that is seeing double-digits.

In 2018, more Americans have made use of personal loans which is now higher compared to previous years, primarily because of the increase of online lenders. The quantity of accounts for personal loan in 2018 climbed to 19.5 million. Comparing it to 2017, this is a growth of 12.5%.

To understand this further, a research was done wherein it delve into how lending online is transforming the market of personal loans as well as other trends that aid borrowers onto saving on personal loan rates and as to why personal loans are now more favored than other lending products.

Personal Loans Are Surpassing Other Lending Products

In the United States, it is evident that personal loans are definitely the quickest increasing and expanding product in consumer-lending. Within the last 5 years, the overall balance of unsecured personal loans has scaled approximately three-folds. As per TransUnion, in the first quarter, it increased 17.6% year-over-year to 120 billion U.S. dollars. TransUnion is among the big-three credit agencies. Of the other products that TransUnion gauged, credit cards came in second having a balance growth of 6.3%, while HELOCs or home equity lines of credit came in last having a drop of 5% in overall balance.

Within the initial quarter of 2019, the average growth balance of personal loan increased 5% to 7,986 U.S. dollars. This growth, yet again, was greater compared to other lending products. Student loans came in second with an increase of 4.2%. The disparity of personal loans and the other lending products is most noticeable as the origination growth were compared. Origination is the number of issued new loans. In the last quarter of 2017, 3.7 million personal loans were originated by lenders, an increase of 24.5% on the same quarter of last year. Majority of the other products that TransUnion encountered a negative progress throughout the same period, like mortgages wherein it dropped 14%, as well as auto loans that dropped 1.5%.

Online Lenders Are On The Lead

The impressive upsurge of personal loans went along with the growth of companies of fintech tendering a variety of lending solutions online. according to TransUnion, In 2017, companies of fintech accounted for approximately 36% of the overall quantity of personal loans, matched to not more than 1% back in in 2010. Even the biggest banking institutions in the globe have acknowledged the makings and potentials of online lending. For example, in 2017 on its first year of business operation, Marcus by Goldman Sachs, an online personal loan solution, originated about 2 billion U.S. dollars worth of personal loans with no fee.