Lenders have continued tightening their standards even more. Then came the banking crisis, starting with Silicon Valley Bank’s failure last March. “This is due to being worried about the economy, and also due to decreased demand from the investors that typically buy these loans, many of which are waiting for a more certain economy.” Lenders originated 4.2 million personal loans in the first quarter of the year, more than 18% below the previous quarter and down 15.5% year over year, TransUnion said.īut the first quarter of 2022 was a period of “unprecedented growth,” where lenders were speeding up originations after the worst days of the pandemic, said Liz Pagel, senior vice president and consumer lending business leader at TransUnion.Īs inflation surged, lenders pulled back on personal-loan offers, Pagel said. These high rates have deterred many consumers. Five-year loans averaged 18.84%, up from around 15% a year ago. What personal-loan rates can you expect?Īs of early August, three-year loans averaged 15.04%, up from 10.65% a year ago, according to Credible, an online platform that compares interest rates and offers. “You have to be careful and very disciplined in this approach,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling, an association of nonprofit credit counseling services. Three months later, those scores drifted to an average 22-point increase.īut it’s not for the faint of heart. The credit scores of people using personal loans to pay their card balances jumped 30 points, according to a separate LendingTree study also released last week.
Other research also shows consolidating pays off. “However, it’s important to pair this with changes in spending habits to ensure that the credit-card debt doesn’t return.” “Consolidating credit-card debt into an unsecured personal loan can be a good option to pay your debt off while freeing up funds in your monthly budget,” Margaret Poe, head of consumer credit education at TransUnion, said in the report. “For many credit card debt consolidators, those balances returned close to their previous levels 18 months later,” the report added. But old habits may resurface among many of the consumers involved in the study.
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