Unsecured personal loan balances that have been borrowed from credit unions and financial institutions in general have increased, according to recent data. (iStock)
According to data from CUNA Mutual Group.
Credit union loan balances increased 14.6% annually in May, the fastest annual rate since May 1995. On a monthly basis, unsecured personal loan balances increased 3% in May, while other loan balances increased by 2.3%, according to the report.
Kenny Cooper, vice president of lending at Neighborhood Credit Union, said the credit union has seen substantial year-over-year growth in unsecured lending and expects that to continue as consumers look for ways to cope with rising costs.
“If a consumer is looking to take on unsecured debt, a credit union is the best option,” Cooper said. “Not only are credit unions capping their interest rates at 18%, which is considerably lower than many [non-credit union competitors], the personal relationship that credit union members have with their credit union can make it easier to get loans. Credit unions tend to lend to people who may have been underserved or overlooked by larger financial institutions. »
If you’re considering a personal loan to help pay off your credit card debt, it’s essential to seek the lowest interest rate possible. You can visit Credible to compare personal loan rates for free without affecting your credit score.
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Unsecured personal loan growth for all lenders
Personal loan growth hasn’t just surged in credit unions; balances are up across the board for financial institutions in general.
Personal loan debt hit $192 billion in the second quarter of this year, a 31% jump from 2021, Trans Union reported. Borrowers also took on larger sums of money, with the average loan size standing at just over $8,000, up from $7,000 last year.
One of the drivers of growth has been the broadening of borrowers’ credit profiles. The TransUnion report showed that lenders have expanded loan eligibility to include borrowers with lower credit scores. Originations increased 56.5% to 5 million new loans, with all credit risk levels growing at least 20% year-on-year. However, subprime borrowers saw the largest increase in issuance at 71.2%, according to TransUnion.
Another driver of lending activity, according to Cooper, has been the increased number of fintech companies in the space using aggressive advertising to educate consumers about these financial options when seeking an unsecured loan.
Chris Cohen, Chief Innovation Officer of Kasasa, also noted the competition between traditional banks and fintech companies, while pointing out the potential benefits of borrowing a personal loan from a credit union.
“Competition to attract borrowers remains very strong as megabanks and fintechs aggressively seek to drive personal loan growth,” Cohen said. “Credit unions have unique advantages and a reputation for delivering a more personalized customer experience and a willingness to work directly with borrowers to tailor a solution that works, which is crucial in times of economic uncertainty.”
If you want to borrow a personal loan, you can browse the current personal loan rates in the table below and visit Credible to learn more about how to qualify for the lowest rates.
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High inflation contributed to the increase in personal borrowing
Inflation tops the list of reasons consumers have turned to personal loans, according to TransUnion. As the overall cost of living remains high, personal loans have offered potential financial relief to struggling consumers, said JP Kelly, president of OpenClose.
“Inflation is over 9%, which means the cost of living is more expensive than it used to be,” Kelly said. “For some trying to make ends meet, getting an unsecured loan could be a quick option to put themselves on firmer ground, and that’s certainly why we’ve seen this recent uptick. “
Most personal loans are also structured with fixed interest rates, meaning the rate won’t change regardless of inflation and can be repaid over months or even years.
“Inflation is weighing on many family budgets,” said Chris Motola, financial analyst at MerchantMaverick.com. “Many of these families have to turn to credit to maintain their lifestyle or, in some cases, even routinely pay their energy and transportation costs. When credit card balances begin to spiral out of control, some borrowers are turning to unsecured personal loans for lower interest rates and debt consolidation.”
Personal loan rates vary widely depending on credit rating and length of loan. If you’re curious about what kind of personal loan rates you might qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates will not affect your credit score.
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