Personal loans are still a cheap option for people looking to consolidate debt, and are still widely available to borrowers.
That is good news that we can report now that there is data to show what happened to personal loan loans earlier this year when online lenders began to recede.
The verdict: the origination rate of personal loans declined during the second quarter of 2016 compared to the same period last year, but millions of people still borrowed and total balances exceeded $ 100 billion for the first time, according to data from the TransUnion Credit Office.
“One of the big drivers of growth has been fintechs,” says Jason Laky, a senior vice president at TransUnion. “As Lending Club, Prosper, Avant and others have made personal loans cool again, it has not only benefited them, it has benefited banks and credit unions and others in this segment.”
Another factor in the popularity of personal loans is interest rates.
In Bankrate’s national survey on bank interest rates and savings by November 16, 2016, the personal loan rate remained at its lowest point for the second consecutive week, at 10.64 per cent. hundred.
This week’s average fell nearly three-quarters of a percentage point from its 2016 high. A year ago, interest on the average personal loan was 11.09 percent.
The average personal loan rate is well below what the typical credit card charges in interest, making the personal loan an attractive option for borrowers seeking to abandon high payments.
Online Loan Growth
Personal loan origination fell 0.5 percent in the second quarter to 3.57 million, according to TransUnion. But Laky says there is reason to believe that stagnant growth was only temporary.
“The investor interest is still there, and there are still new, emerging and ongoing,” says Laky.
TransUnion measures the origin of a quarter of the arrears to account for the delay of the reports, so we still do not know with certainty how the period from July to September was.
The largest online lender, Lending Club, last week reported that third-quarter origination had fallen 12 percent to $ 1.96 billion, so getting a loan could be difficult for some borrowers.
“We are actively engaging with investors of all kinds to comply with our plan and allow $ 2 billion in loan origination,” said Lending Club CEO Scott Sanborn. “Although we have made incredible strides, there is still work to be done.”
Even with the problems of expensive online lenders, they have been a great booster of growth in the personal loan market. TransUnion finds that the share of fintech lenders in personal loans has more than tripled since 2013.
They accounted for 26 percent of all personal loan origination during the second three months of this year, up from 8 percent in 2013.
Some missing in loans
But not everyone is benefiting.
TransUnion found that loans to borrowers with average to slightly above average credit declined, while loans to borrowers with excellent credit rose slightly. The original originals fell 4.7 percent, while the first originations fell 2.7 percent between April and June.
In general, credit scores close to the first credit are at least 660, while prime credit scores start at around 720.
“Certainly, in the second quarter of 2016, it was more difficult for those segments to get a loan than in the second quarter of 2015,” says Laky.
Borrowers with bad credit or very good credit did better, as origination in these categories of borrowers grew 3.2 percent.
“The decline in the first and first origination reflects the challenges some Fintech lenders face,” says Laky. “Compensating for this, banks and credit unions are expanding at the level of superprime risk.