Personal loans offer fast, lump-sum financing that can be used to consolidate high-interest debt, pay for home renovations, and finance major purchases. At the start of the coronavirus pandemic, personal loans fell sharply – but they are expected to make a strong comeback in 2022.
According to the 2022 consumer credit forecast from credit bureau TransUnion, demand for personal loans is expected to reach all-time highs this year as consumers look for ways to pay off growing credit card balances. Lenders should increase personal loans to primary borrowers with excellent credit and subprime borrowers with credit scores below 660.
“Lenders are eager for continued growth, including returning to the unpreferred consumer segment,” said Charlie Wise, senior vice president of TransUnion.
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Personal loans are expected to exceed pre-pandemic levels, with TransUnion forecasting 20 million loans in 2022. That’s a dramatic increase from 14.2 million loans in 2020.
“This growth will be spurred by an eventual return in demand for credit card consolidation loans as card balances increase,” said Liz Pagel, senior vice president of TransUnion.
Keep reading to learn more about TransUnion’s forecast for the unsecured loan market in 2022, and visit Credible to buy personal loans from multiple lenders at once.
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Personal lenders will again focus on subprime borrowers
Over the past year, the personal loan industry has seen significant growth among borrowers with credit scores between 300 and 660. jumped 47% over the previous year, according to TransUnion’s Q4 report. 2021 Quarterly Credit Industry Outlook Report.
TransUnion expects this trend to continue in 2022 as lenders continue to increase short-term loans to borrowers with subprime credit histories.
“The economy is normalizing and continuing to grow, and these signs of renewed strength encourage lenders not only to focus on lower-risk consumers, but to provide better access to people who may be considered risky. higher credit ratings,” Wise said.
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TransUnion expects personal loans to grow 11% for non-preferred borrowers in 2022, slightly lower than the 14% growth expected among preferred consumers. But due to the increase in subprime loans, delinquencies are expected to increase somewhat.
“While the increase in subprime issuance has led to a slight increase in delinquencies, they remain well below pre-pandemic levels, and delinquencies by risk level remain fairly stable,” Pagel said.
This renewed interest in subprime loans will give consumers with fair or poor credit the opportunity to borrow personal loans to pay off higher interest rate debt and finance major expenses. Subprime borrowers with low credit ratings who are considering taking out a personal loan should shop around with multiple lenders to avoid bad loans with high interest rates.
You can browse current personal loan rates in the table below and visit Credible to see your estimated loan terms for free without affecting your credit score.
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Credit card consolidation will drive personal loan growth in 2022
Demand for personal loans remained weak through early 2021 as consumers received stimulus checks and reduced spending. But amid the economic recovery, consumer spending and revolving credit balances continue to rise — and many borrowers will be looking to unsecured loans to pay off their credit card debt.
“With consumer spending expected to increase in 2022, TransUnion forecasts predict this could lead to a continued rebound in the consumer loan market, especially as consumers begin to seek unsecured personal loans again to shore up growing balances. of their cards,” the report said.
Unsecured personal loans give borrowers the ability to pay off high-interest credit card debt at a low, fixed rate. While the average credit card interest rate is 16.44%, according to the Federal Reserve, the average rate for a two-year personal loan is at an all-time low of 9.09%.
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Personal loans make it easier to pay off revolving credit card balances because they are repaid in fixed monthly installments. Thanks to lower interest rates, well-qualified borrowers could save nearly $2,400 in interest charges by consolidating credit card debt with this type of loan, according to a recent analysis by Credible.
You can learn more about credit card consolidation loans by contacting a knowledgeable loan officer at Credible. You can also use a personal loan repayment calculator to see if this debt repayment strategy is right for you.
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