We’re all familiar with the term personal loans. They fall into the category of consumer debt and are used for a myriad of applications including household repairs, to pay for educational or medical expenses, or to fund a small business. Also known as signature loans, personal loans are largely based on your credit history and ability to repay the funds from a steady income stream. What you may not be aware of is that the amount of personal load debt in America is currently swelling at record rates as we enter the second half of 2018.
Personal Loan Debt Origination
When one thinks of personal loans, they often think of borrowing money from Aunt Betty with a promise to pay her back, however these unsecured loans are much more dynamic. Countless companies from Lending Club to Wells Fargo to Goldman Sacks have entered the personal loan market funneling billions of dollars into available funds and causing the industry to incur double-digit growth rates. Last year, the Federal Reserve Bank estimated that personal consumer loans equated to $1.38 trillion in the US, compared to $42.3 trillion the previous year. Therefore, it’s safe to assume that the surge in personal loan debt numbers has been fueled not only by the amount of money available from venture capitalists, direct investments, and various bond structures, but also by a massive influx of new loan providers to the market.
Personal Loan Shares: 2018
Personal loans may also gaining popularity for two other, very applicable, reasons: they are a relatively cheap form of debt, and are easier to qualify for any many instances. When taking out a personal loan, the APR is often lower than what you’d see from a credit card provide. In addition, signature loans are often awarded with no application or origination fees, making them a low cost alternative to other types of consumer debt. Likewise, higher interest personal loans are available to almost any credit score imaginable. In fact, personal loans have historically been considered a ‘subprime product’, but as the market expands the share of subprime loan originations has surprisingly decreased. This eludes to moderate to low risk borrowers getting in on the action.
Personal Loans and Bankruptcy
Personal loans, as aforementioned, are unsecured loans with no collateral backing them. Because of this fact, personal loans, along with medical debt and credit card debt, are typically among the debt that is wiped out during a Chapter 7 bankruptcy and minimized based on your income in Chapter 13 bankruptcy. If you have struggled to pay back personal loans or other types of debt with no foreseeable solution, contact your Dallas bankruptcy attorney to discuss your options for debt relief. Even if you and your Texas bankruptcy lawyer decide that bankruptcy isn’t the best choice for your personal financial situation, they should be able to point you to credit counseling that can help you get back on track.