Millennials applying for smaller personal loans, likely for less expensive everyday expenses: Data Lab
Newly released LendingPoint data show that more people are taking out personal loans this year than last but, surprisingly, they’re asking for smaller amounts. And the younger the borrowers, the more their loan amount requests are shrinking.
This eye-opening trend was identified in a close study of more than 65,000 LendingPoint loan applications from 2017 and 2018.
Across the lending industry, 2018 has seen a surge in personal loans unprecedented in a decade or more. TransUnion reports that in Q2 (April to June) 2018, the number of personal loan accounts rose to 19.5 million, up 12.5% since Q2 2017. In fact, LendingPoint funded more personal loans in the first 10 months of this year than we did in all of 2015, 2016 and 2017, combined.
Younger people — including millennials — are fueling much of that growth, as our last Data Lab report revealed. The pool of borrowers is not only growing, it’s increasingly younger.
But, as the LendingPoint Data Lab team dug deeper into our loans to see what else they tell us about the shifting borrowing habits of Americans, they discovered the trend toward smaller loans among younger borrowers.
While the average loan request of all our personal-loan borrowers dropped almost 8% — from about $12,200 to $11,300 — the trend for millennials and younger is more pronounced.
Last year, our average millennial borrower (age 22 to 37) asked for a loan of nearly $12,000. This year, that request dropped down to just under $10,300, a decrease of about 14% (by comparison, GenX borrowers — age 38 to 53 — reduced their average loan request only about 6%, from about $12,700 to a little less than $12,000, in that same period).
At the same time, through October 2018, we extended loans to more than twice as many millennials than we did in all of 2017.
This data suggests that not only are more people seeking out personal loans, they may be doing so to cover smaller, lower-cost needs — the kinds of things they might encounter every day — not just for infrequent big-ticket expenses. This is especially true among the younger cohort. Personal loans are becoming relevant to a broader group of people, who prefer fixed-payment, fixed-term debt as a payment method.
We know younger people avoid credit cards more than older counterparts, so they may find particular value on relying on loans for less-expensive items than prior generations, who may still use plastic for those same types of purchases.
The following tables summarize the year-over-year loan request data, by generation.
\Average loan request by age (generation) – all loans
*GenY (18-21 year old) and Silent Generation (73 year old and over) borrowers represent less than 2% each of total borrowers; data for those age groups is not statistically significant in this study.
About LendingPoint Data Lab:
The LendingPoint Data Lab analyzes data, from both LendingPoint’s own business and from third party sources, to unearth trends and insights into Americans’ borrowing behavior.
For this study, the LendingPoint Data Lab analyzed the loan applications of individuals to whom the company extended personal loans in 2017 and 2018 (a total of 65,626 loans). An individual’s age factors neither into his or her creditworthiness nor LendingPoint’s decision to extend a loan to him or her.