Personal Loans Market Booming Thanks to Fed, Low Unemployment
(Source: Bankrate) NEW YORK – 24 million Americans are likely to take out a personal loan this year, according to a new Bankrate.com (NYSE: RATE) report, including 10 million who are very likely and 14 million who are somewhat likely.
“I think the actual number will be even higher,” said personal loans expert Todd Albery, the CEO of Quizzle.com, a Bankrate company. “A lot of people don’t plan for a personal loan until their roof leaks or their car breaks down. Since three in 10 Americans have no emergency savings whatsoever, they’re just one unplanned expense away from needing cash in a hurry.”
Personal loans are unsecured loans that do not require borrowing against something of value, such as a house or automobile. This makes them attractive to the large segment of the population which doesn’t have much savings or home/car equity. In addition to financing emergency expenses, personal loans can also be used for home improvements, debt consolidation and other purposes.
“The personal loans market is hot right now,” according to Albery. “New online peer-to-peer lenders as well as traditional banks and credit unions see this as an area with lots of potential. They’re willing to take a little more risk due to the low unemployment rate and the Federal Reserve’s low interest rate policy.”
Bankrate.com has found personal loan offers as low as 5.5% for people with good credit (the average is 11.3%). This is very attractive for someone looking to consolidate credit card debt (the average credit card rate is 15.7%).
Of course, personal loans aren’t the best choice for everyone. People with home equity should consider home equity loans and lines of credit, which charge lower rates but require the home as collateral. On an unsecured basis, Americans with good credit could qualify for a 0% balance transfer credit card for as long as 21 months.
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Princeton Survey Research Associates International obtained telephone interviews with a nationally representative sample of 1,003 adults living in the continental United States. Interviews were conducted by landline (500) and cell phone (503, including 340 without a landline phone) in English and Spanish by Princeton Data Source from January 7-10, 2016. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error for the complete set of weighted data is plus or minus 3.6 percentage points.