As inflation rises, more Americans are borrowing money to cover expenses. Americans have nearly $178 billion in unsecured personal loans outstanding — a record, according to The Motley Fool. The average balance is $9,896.
According to a new report from JD Power, competitive rates, easy access and a variety of options have driven consumers to adopt personal loans on a large scale.
According to the report, some of the greatest growth has occurred among financially vulnerable consumers accessing these products to get through tough economic times.
“Increasingly, personal loans are filling the void left by the end of pandemic-era relief efforts, bringing an important new dynamic for banks, credit card companies and FinTechs at the center. of this market,” Craig Martin, global head of wealth and lending intelligence at JD Power, said in a statement.
“As customers are largely satisfied with these products and the market continues to grow, it’s important for lenders to ensure that the experiences they offer match the promises they make to support better financial health. “
JD Power research found that 38% of personal loan customers are classified as financially vulnerable. They get a personal loan mainly to settle their debts, including debt consolidation; lower interest rate on current debt; and a lower monthly payment on existing debt.
Some brands that cater to high-risk customers have almost double the average number of financially vulnerable customers.
According to the study, overall customer loyalty to personal loan products is high, with 61% of loan customers saying they are likely to use their lender again.
JD Power noted that this could create expanded opportunities for lenders who historically only offered loans, as they expand their product offerings with checking, savings, credit card and investment options. .
Forty-seven percent of consumers said an advertisement prompted them to consider a personal loan. But the study found that the range of advertising effectiveness is wide: some brands only generate 31% of new business from advertising, while others generate 56% of their business from advertising.
The study also found significant differences in men’s and women’s responses to specific brand experiences.
At the individual brand level, overall satisfaction with lenders varies by at least 25 points (on a 1,000-point scale) between men and women at more than half of the lenders in the study, and more of 50 points for nearly a quarter of the marks.
“As the personal loan market continues to grow rapidly, it’s critical to note that no single option can do it all for all consumers,” Tom Lawler, head of loan intelligence at consumption at JD Power, said in the release.
“The most successful companies have a clear understanding of the different needs and expectations of their target customers and optimally invest resources to meet or exceed the expectations of these different groups.”
In the gallery above are the lenders that scored above and below the industry average for customer satisfaction, according to JD Power.