Millennials driving surge in personal loans

According to the latest from LendingPoint Data Lab, exploding numbers of Americans are taking out personal loans to pay for all sorts of things they need and want, whether a vacation, a home renovation, a dream wedding, or even necessary medical procedures.

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In the first three months of 2018, there were 19.2 million outstanding personal loans in the U.S., compared to 16.9 million in the first quarter of the previous year. About 17 million Americans now have such loans.

We’re seeing that trend for ourselves at LendingPoint. In the first half of 2018, we funded more loans than we did in all of 2017.

The more customers we serve, the more we notice something striking about them. They’re getting younger. 

Since we issued our first loan in 2015, the proportion of borrowers age 18 to 35 has doubled, from about 12% in 2015 to 24% in 2018. Drilling down into that group, the “reverse aging” effect becomes even more stark: the proportion of our customers aged 30 and under has almost quadrupled, from less than 3.5% in 2015 to nearly 13% in 2018. 

And this year, for the first time, borrowers under 46 years old now make up the majority of our customers:

• In 2015, 41% of borrowers were under 46
• In 2016, 44% of borrowers were under 46
• In 2017, 50% of borrowers were under 46
• In 2018, 52% of borrowers are under 46 

Check out the table at the end of this post for more data about the ages of our borrowers by year

Without question, this trend extends beyond just our four walls: millennials and GenYers are instrumental to the surge in personal loans everywhere. Here are some likely contributing factors:

• Younger people don’t use credit cards as much as older generations: GenXers owned two more credit cards than millennials when they were the same age. The lack of plastic in their wallets means younger Americans must rely on other sources for credit.
• Student loan ubiquity has acclimated young people to making monthly loan payments. Other than mortgages, student loans are the most common form of debt in the U.S. Younger people enter adulthood making student loan payments as a matter of everyday life. It’s a habit that primes them for the fixed monthly payments personal loans require.
• Personal loans are increasingly transacted on digital platforms, and younger people are very comfortable doing business that way. Fintech companies like LendingPoint accounted for 36% of personal loans issued in 2017, compared to less than 1% in 2010. It stands to reason that the proliferation of fintech companies offering personal loans over the past decade would correlate to rising numbers of younger borrowers, as many of those customers prefer using digital financial products for their banking.

If you’re curious how these younger borrowers spend their loans, check out our Data Lab blog post from July, where we analyze the reasons each age group provides when they apply for loans. Spoiler alert: younger borrowers are much more likely to pay for weddings and relocation than their older counterparts.

The following table shows each age group as a percent of that year’s originated personal loans:

(Source: LendingPoint internal data, 49,545 funded loans, 2015-2018)