The number of consumers turning to personal loans to finance purchases is quickly growing.
Overall, the number of consumers with personal loans jumped by 18% from the 3rd quarter of 2013 to the 3rd quarter of 2015, according to recent data from TransUnion.
Indeed, in the 3rd quarter of 2015 there were 27.34 million consumers with personal loans.
That represents a balance of $82.52 billion in unsecured loans and $165.46 billion in secured loans.
"During and immediately following the Great Recession, consumer demand for both secured and unsecured personal loans grew. As new, well-funded online lenders and 'fintech' startups entered the market, personal loans had a broader appeal for consumers across all risk tiers," Jason Laky, senior vice president and consumer lending business leader for TransUnion, said in a news release.
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No collateral loans
Unsecured loans, or loans that don't require collateral, are expected to continue growing throughout 2016.
By the end of this year, TransUnion predicts that the average consumer unsecured loan balance will hit $7,599. That's up from an average balance of $6,757 at the end of 2014 and a projected $7,235 at the end of 2015 (TransUnion doesn't yet have numbers for the 4th quarter of 2015).
You'll have an easier time getting an unsecured loan with better credit.
Of the 13.51 million consumers with unsecured personal loans, 6.46 million were in the prime or better risk tiers, which equates to those with a VantageScore credit score higher than 661, the TransUnion report says.
Only around 3.51 million of those consumers were in the subprime risk tier.
Secured loans for big purchases
The number of consumers using secured loans to finance bigger items is on the rise as well.
TransUnion expects the average consumer secured loan balance to hit $17,904 at the end of 2016, up from $16,752 at the end of 2014 and a projected $17,411 at the end of 2015.
"When the economy is stronger and consumers have more disposable income, consumers are more likely to purchase larger items, such as boats or motorcycles, using secured loans," Laky said.
Like unsecured loans, the majority of secured loans are going to those in the prime or better risk tier. It accounts for more than 7.13 million of the 13.6 million consumers.
Those in the subprime risk tier accounted for only 3.34 million of secured loans.
Whether you're in the market for a unsecured or secured loan, it pays to shop around for the best rates.
Don't settle for the first loan you come across.
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