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Credit union members borrow record volumes, especially unsecured personal loans, according to Mutual group CUNA.

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In May, credit union loan balances rose 14.6% year on year, the fastest annual pace since May 1995. On a monthly basis, unsecured personal loan balances rose 3% in May, while other loan balances rose 2.3%, the report said.

Kenny Cooper, vice president of lending at Neighborhood Credit Union, said the credit union has experienced significant growth in unsecured loans compared to last year and expects it to continue as consumers look for ways to cope with rising costs.

“If a consumer wants to take on unsecured debt, a credit union is the best option,” Cooper said. “Credit unions not only cap their interest rates at 18%, which is significantly lower than many [non-credit union competitors], credit union members’ personal relationships with their credit unions can make it easier to obtain loans. Credit unions tend to make loans to individuals who may have been underserved or overlooked by larger financial institutions.”

If you’re considering getting a personal loan to help pay off your credit card debt, it’s important to find the lowest possible interest rate. You can visit Credible to compare personal loan rates for free without impacting your credit score.

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Unsecured personal loan growth for all lenders

The rise in consumer credit has not only occurred in credit unions; balance sheets rose across the board for financial institutions in general.

Personal loan debt reached $192 billion in the second quarter of this year, up 31% from 2021. TransUnion reported. Borrowers were also borrowing larger amounts of money, with the average loan amount just over $8,000 compared to $7,000 last year.

One of the growth drivers was the expansion of the credit profile of borrowers. The TransUnion report showed that lenders have expanded eligibility to include borrowers with lower credit scores. The number of loans issued increased by 56.5% to 5 million new loans, with all levels of credit risk up by at least 20% year-on-year. However, according to TransUnion, subprime borrowers posted the largest increase in issuance, at 71.2%.

Another driver of lending activity, Cooper said, has been the increase in fintech companies that use aggressive advertising to make consumers more aware of these financial options when they want an unsecured loan.

Chris Cohen, Chief Innovation Officer at Kasasa, also noted the competition between traditional banks and fintech companies, while highlighting the potential benefits of getting a personal loan from a credit union.

“Competition to attract borrowers remains very strong as both megabanks and fintech companies actively seek to stimulate the growth of consumer loans,” Cohen said. “Credit unions have the unique strengths and reputation of offering a more personalized approach to clients and a willingness to work directly with borrowers to tailor a solution that works, which is critical in a time of economic uncertainty.”

If you are interested in getting a personal loan, you can view the current personal loan rates in the table below and visit Credible to learn more about how to qualify for the lowest rates.

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High inflation contributed to an increase in borrowing by individuals

Inflation tops the list of reasons consumers turn to consumer loans, according to TransUnion. As the overall cost of living remains high, consumer loans offer potential financial relief to needy consumers, said JP Kelly, president of OpenClose.

“Inflation has topped 9%, which means the cost of living is more expensive than it once was,” Kelly said. “For those struggling to make ends meet, getting an unsecured loan can be a quick option to get back on firmer ground, which is why we are seeing this recent surge.”

Most personal loans are also structured with fixed interest rates, which means that the rate will not change regardless of inflation and can be repaid over months or even years.

“Inflation is hitting household budgets hard,” said Chris Motola, financial analyst at MerchantMaverick.com. “Many of these families have to turn to loans to maintain their lifestyle or, in some cases, even pay their electricity and transportation costs on a regular basis. When credit card balances start to spiral out of control, some borrowers turn to unsecured personal loans for lower interest rates and debt consolidation.”

Loan rates for individuals vary significantly depending on the credit rating and the term of the loan. If you’re wondering what personal loan rates you can qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking rates will not affect your credit score.

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