Personal loans are the “fastest-growing type of consumer debt” in the past year, according to data from Experian.
Personal loan debt reached $273 million in the second quarter, an 11 percent increase, compared to the same quarter in 2017. That percentage growth is bigger than auto, credit cards, mortgages, and student loan debt, Experian says.
Another factor in the soaring popularity of personal loans is the rise of online lenders, known as “fintech.” Startups such as SoFi, Marcus, Prosper, Best Egg, Avant, and Upstart have contributed to the growth of personal loans, says Experian. They now account for more than 30 percent of all new personal loans.
Their market share will likely continue to grow as a U.S. bank regulator recently announced fintech companies, if approved, will be allowed to operate independently across the country under a single federal license.
Personal loans usually come with lower interest rates than credit cards, so they often can be used to consolidate debts into a single, more affordable monthly payment. But interest rates depend much on your credit profile and consumers should shop around since personal loans can carry a range of fees.