More Americans Than Ever Are Relying On Personal Loans
Personal loans are gradually gaining popularity as consumers rely on unsecured loans to pay off their mounting debts. The share of Americans with personal loans will peak by 2025, with nearly four in 10 adults using one, according to Experian data.
“American consumers continue to spend, based on the latest retail sales figures, and credit card balances continue to rise,” the report said. “At the same time, higher interest rates on existing credit card balances may encourage more consumers to look for less expensive ways to manage that debt.”
Although not as restrictive as high-interest credit cards, taking out unsecured debt with average rates above 10% is usually not plan A. But the trend line regarding personal debt has been consistent: The share of consumers with this type of debt has increased each year for nearly a decade. The pace of growth has gotten a boost, too, with the share of Americans with loans rising by one percent or more a year starting in 2021.
The total number of personal loans on credit reports now stands at 67.5 million – up 7% from 2024. Of those loans, 30 million are unsecured, meaning they are not tied to a car or other property. For that reason, they usually have high standards.
Record number of consumers have personal loans: Report
Experian, which connects consumers with personal loan lenders, puts the growth in this business as a sign that more consumers are using loan product strategies “to finance and consolidate high-interest debt.”
And while that may be true, the news is also a warning sign that — whether it’s inflation, the job market or something else — consumers are facing tough financial conditions that are pushing them toward more expensive loans. For borrowers with strong credit, personal loans can carry rates as low as 7% or 8%, starting in early 2026. But for some consumers, such as credit cards, APRs can exceed 30%.
The average personal loan balance is $19,333, according to Experian, and the Federal Reserve reports an average rate of 11.65% for two-year loans. At those rates, the borrower will pay more than $180 a month in interest in the first month. After a year of paying, they would still you pay over $100 a month just in interest. (In total, that loan will be over $2,400 in interest.) In addition, many borrowers are turning to loans with longer terms, usually up to 5 or 7 years, as a way to keep monthly payments low. But longer terms often carry higher APRs.
Personal loans can sometimes help consumers manage credit card debt that is hurting their credit. And when interest rates drop, personal loans can be an option to pay off high-interest-rate debt — basically trading one debt for another at a lower rate.
Recent interest rate cuts have “clearly accelerated personal loan activity,” said Rakesh Patel, senior vice president of Experian Consumer Services Marketplace, in a report. When rates drop by a percentage point, that could be enough for consumers to refinance with a new personal loan, Patel adds.
While the Federal Reserve held interest rates on Wednesday, previous interest rate cuts in September, October and December may have led to more personal loan lending at lower rates.
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