Personal loans are financial loans that you take from banks or other financial institutions to help you with financing your personal goals, whether they’re related to education, cars, consumer goods, or housing and real estate.
Given the increasing cost of living in the United States and the fact that more people will be looking to finance their endeavors rather than seeking jobs where they work, the demand for personal loans in the country will continue to rise over the next decade.
This article takes a look at what’s been happening with personal loans in the USA already and provides predictions on how they’ll develop over the next ten years.
The personal loans market in the USA
In 2022, personal loans are expected to be a multi-billion dollar industry. Several loan providers are competing for market share across the USA including Lending Club, Prosper, and Quizzed.
The need for a wider audience of loan seekers is one reason why more loan providers will enter into competition with each other.
The data from Experian indicates that 69% of consumers have debt between $5,000 and $50,000, and most are paying over 20% interest on those debts.
As a result, many borrowers will seek out alternative ways to refinance or consolidate their debts and lenders will capitalize on that need by undercutting the standard financial institutions’ rates to attract borrowers away from them.
Each loan provider has its criteria for assessing a borrower’s risk and will set different thresholds for approval.
Whether you’re buying a new car, renovating your house, or paying off debts, it may be an easier process than you think to get some extra cash.
Borrowers looking to consolidate debt or refinance their existing loans will want to compare all of their options before settling on one lender.
The types of personal loan
In 2022, there are many different types of personal loans available on a national level. Several organizations offer loans to people without good credit, including some local credit unions and traditional banks.
Several new online lenders have sprung up recently, making it possible for just about anyone to qualify for a loan (of course there’s a catch).
As with other types of loans, interest rates vary greatly depending on the terms. Lenders with bad credit often charge more than lenders with good credit because they want to offset their risk of lending money to individuals who may not be able to pay them back.
When it comes to personal loans, people with good credit often get preferential treatment. This means they can take advantage of lower interest rates and better loan terms.
Their credit score (as well as their income) plays a role in determining whether or not they’re approved for a loan and how much interest they’ll have to pay over time.
Those who have poor credit will typically be offered higher interest rates because lenders assume that their risk of default is greater than someone with good credit.
Personal loan interest rates
Interest rates on personal loans will be much lower than they are today, meaning you can get more money while paying less over time.
Lower interest rates are great for borrowers and slightly detrimental to lenders since they collect a smaller amount of interest from each loan.
In short, more people will take out personal loans for bigger purchases, like cars and homes. Personal loans give people who can’t afford large payments with credit cards (plus all of their fees) an option to help finance these items at a lower rate and over a longer period.
The market is strong enough that even big companies will offer their loans to customers directly—and at competitive rates!
It’s estimated that 10 million Americans will use Amazon to request and pay back a personal loan by 2022.
Personal loans will make it easier to purchase large items like cars and homes since consumers can take out a loan at an affordable rate to pay for these items.
In fact, by 2022, big companies will start offering their loans directly. For example, Amazon is likely to start up its lending service as they currently offer some of its customer’s short-term loans through a partnership with Wells Fargo.
Availability of personal loans
Personal loans in the USA have grown massively over time and now stand at a huge $1.4 trillion. The vast majority of these are secured against either property or cars, with both of these options seeing massive growth over recent years.
When it comes to personal loans, it is necessary to secure them well as failing to do so can lead to huge problems if anything were to go wrong.
Fortunately, several companies are offering great personal loan packages that make securing one simple and easy for people all across America.
For example, they will offer flexible repayment plans that allow borrowers a range of options when it comes to how often they repay each month; making payments more manageable and cheaper than they would be without any sort of plan.
Personal loans are definitely on the rise and by 2020 there will be $1.7 trillion worth of personal loans out there, making it even easier for people to get hold of the money that they need.
As long as you find a good provider with competitive rates and flexible payment plans, getting a personal loan should be easy and hassle-free.
The challenges for personal loan borrowers
Personal loans are relatively easy to get, with no credit check and no collateral required, but that doesn’t mean they’re free of issues.
The biggest challenge borrowers face is interest rates. On one hand, you don’t have to qualify on your credit score or provide any collateral to get a personal loan (though it will be held against you if you default).
That can be an advantage if your credit history has taken a hit from one thing or another—you just need enough money and willingness to pay it back.
But personal loans are also some of the most expensive forms of financing available because there aren’t many regulations protecting borrowers from predatory interest rates.
Despite its initial popularity, personal lending has been marred by issues of quality. Smaller lenders have gone under after making loans to people who can’t pay them back—and in some cases, even trying to collect from borrowers who don’t have enough money to make their payments.
Larger banks like Wells Fargo and JPMorgan Chase have also gotten into trouble for charging unfair interest rates and fees on loans.
The future market forecast for 2022
Personal loans are growing rapidly and are expected to continue to do so for another decade. If you borrow $10,000 for a term of five years with a relatively low-interest rate of 5% (less than many credit cards), you’ll pay about $440 per month for your loan.
If that money is invested at 6%, you could earn roughly $18,000 over those five years, which is almost double what you’d pay to borrow from your friend or family.
personal loans are an investment that might cost less than 6%, giving you an actual profit on your money instead of paying off someone else’s loan!