With the help of our research provider, Pureprofile, Finder surveyed 1,718 American adults in January 2021 to see how personal loans are being used in the US.
The results might be surprising for a year of economic instability. Some 131.0 million Americans, or 51.3% of Americans, said they have taken out a personal loan in in their lifetime.
This is despite the fact that many lenders have made it more difficult to qualify for a loan. Some even stopped offering loans entirely in March 2020, after the coronavirus outbreak hit the US.
The top reason Americans were borrowing in January 2021 was to get out of debt. Some 37.17% of people surveyed who reported ever taking out a personal loan said they used the funds for debt consolidation. Other popular uses starting a business at 27.41% and covering medical expenses at 26.36%.
| Reasons people take out personal loans | Percentage of people taking out personal loans |
|---|---|
|
Consolidate debt |
37.17% |
|
Start a business |
27.41% |
|
Cover medical expenses |
26.36% |
|
Fund a renovation |
24.74% |
|
Help a family member |
24.16% |
|
Pay for a vacation |
24.04% |
|
Fund a move |
18.82% |
|
Pay for gifts |
18.23% |
|
Legal fees |
17.77% |
|
Pay for a wedding |
16.38% |
|
Pay for a funeral |
14.98% |
This reflects a few new trends for American consumers. The coronavirus has generally seen Americans become more financially responsible. More Americans are saving, paying off debt and taking out personal loans as a way to get out of debt at a lower rate.
We’ve also seen an enormous change in the business landscape. Industries that rely on social contact like restaurants and live venues are struggling. But online retailers and app-based companies have taken off to fill the new consumer need. And personal loans are a popular way to fund the first few months of business.
And finally, medical bills have also been a significant expense in 2020, especially for Americans hospitalized with COVID-19.
High unemployment rates meant that many lost their health insurance when the pandemic hit.
Americans with private insurance sometimes saw medical bills as high as $150,000, according to The British Medical Journal. Part of this is because providers don’t always cover complications that result from a COVID-19 infection. Americans also aren’t always aware of what is and isn’t covered when they’re in the hospital.
The average personal loan was $9,928.62. But that varies depending on how borrowers spent the funds.
Loans to start a business clocked in the highest, at an average of $9,840.99 per loan. This was followed by $6,029.62 to consolidate debt, $5,448.03 to fund a renovation, and $1,716.92 to cover medical expenses.
| Reasons people take out personal loans | Average personal loan size |
|---|---|
|
Start a business |
$9,840.99 |
|
Consolidate debt |
$6,029.62 |
|
Fund a renovation |
$5,448.03 |
|
Cover medical expenses |
$1,716.92 |
|
Pay for a wedding |
$1,715.89 |
|
Pay for a vacation |
$1,259.85 |
|
Help a family member |
$1,216.18 |
|
Fund a move |
$1,003.42 |
|
Pay for a funeral |
$987.82 |
|
Legal fees |
$613.61 |
|
Pay for gifts |
$437.74 |
Overall, people are taking out smaller loans than they were a year ago.
Loans to start a business are typically larger than other amounts — though the average size is down by around $5,000 compared to last year. Startup costs can easily top $10,000 and the fact that these loans are typically secured with collateral makes it easier to qualify for larger amounts.
While many people invested in their homes in 2020, it appears that more are interested in getting out of debt at a lower cost than upping property values.
Other notable changes reflect the effect of social distancing on normally-expensive events. This year saw a roughly $5,000 decrease in the size of a wedding loan and a nearly $2,000 decrease in loans to pay for a funeral.
More men than women took out personal loans in 2021. Some 59.4% of men took out a loan, while only 44.3% of women responded saying they took out a personal loan.
| Gender | Average personal loan size |
|---|---|
|
Male |
$12,336.72 |
|
Female |
$7,100.92 |
Men also borrowed larger amounts than women. Men borrowed an average of $12,336.72, while women borrowed an average of $7,100.92.
This difference could in part be explained by the gender pay gap. In most occupations, especially those that require at least a college degree, women earn substantially less than men. For example, American women who were general and operations managers – senior or executive level positions – earn only 78 percent of what their male counterparts earn according to an expert quoted in a finder study. And women have dropped out of the workforce during COVID-19 at a higher rate than men, according to the National Women’s Law Center. Your personal and household income can affect how much you’re eligible to borrow.
Generally, middle-aged Americans borrowed more than their. Some 56.9% of gen Xers took out a personal loan, followed by 53.9% of baby boomers and 51.8% of the silent generation.
But only 50.6% of millennials took out a loan, and gen Z had the lowest percentage of people who said they took out a personal loan, with only 32.2% of adult gen Zers borrowing.
| Generation | Percentage of each generation |
|---|---|
|
Gen Z |
32.2% |
|
Millennial |
50.6% |
|
Gen X |
56.9% |
|
Baby Boomers |
53.9% |
|
Silent Gen |
51.8% |
This can be explained in part by employment. Most zoomers don’t have the age or experience to be in a job that pays enough to support a personal loan. And millennials may still be working their way up from entry-level jobs to higher paying senior positions.
Although gen X was the generation most likely to have borrowed a loan, the older generations took out larger loans. The silent generation borrowed the most with an average personal loan size $13,348.61, followed by baby boomers at $11,496.40 and Gen X at $10,720.73.
And the few zoomers who took out a loan also borrowed the least. The average loan for gen Z borrowers was $4,494.6 — less than half of what the silent gen borrowed.
| Generation | Average personal loan size |
|---|---|
|
Gen Z |
$4,494.66 |
|
Millennial |
$7,408.72 |
|
Gen X |
$10,720.73 |
|
Baby Boomers |
$11,496.40 |
|
Silent Gen |
$13,348.61 |
This could be related to how Americans are using personal loans. The silent generation, baby boomers and gen X have had more time to accumulate debt to refinance and more opportunities or to buy homes to renovate.
Many millennials and zoomers just don’t have the credit or assets to qualify for a large loan.
While online lending has become increasingly popular, more people are going to banks than any other type of lender — regardless of gender or location age. That is, unless your credit score is too low to qualify.
56.2% of Americans with personal loans borrowed from a bank. Online lenders came in second at 32.2% and credit unions came in last at 26.5%.
Online lenders have grown rapidly in the past year, with 55.87% more people saying they used an online lender for their personal loan this year compared to last year. But many banks have survived shuttered branches by updating or adding an online lending platform to their websites and apps.
Both genders favored traditional banks for getting their personal loan. But in a change from last year, online lenders saw a jump in usage, especially among men. More men borrowed from online lenders than women. And slightly more women borrowed from credit unions than men.
| Gender | Online lender | Traditional bank | Credit union |
|---|---|---|---|
|
300-579 (Poor) |
58.1% |
33.9% |
14.5% |
|
580-669 (Fair) |
38.1% |
45.2% |
25.8% |
|
670-739 (Good) |
32.7% |
59.5% |
21.4% |
|
740-799 (Very Good) |
25.9% |
64.0% |
34.0% |
|
800-850 (Excellent) |
27.0% |
61.9% |
30.2% |
|
I don’t know my credit score |
21.4% |
53.6% |
25.0% |
While roughly the same percentage of men and women borrowed from banks and credit unions, more men borrowed from online lenders in a reversal from last year’s statistics.
Part of this could be explained by the fact that online lenders have become more normalized since March 2020. Some like SoFi® have applied for bank charters. And online lenders that also offer business loans have partnered with banks.
Online lenders have also tightened their credit requirements compared to last year. And while some banks and credit unions are offering customers pandemic relief loans, online lenders generally aren’t.
Even when we accounted for credit score, more Americans borrowed from banks than any other type of lender. The one exception was borrowers with scores that fell in the poor credit range.
More poor-credit borrowers relied on online lenders than banks — but banks were still a popular choice, even for this demographic.
Type of lenders used for personal loans by credit score
| Credit score | Online lender | Traditional bank | Credit union |
|---|---|---|---|
|
300–579 (Poor) |
45.68% |
35.80% |
27.16% |
|
580–669 (Fair) |
38.01% |
39.77% |
31.58% |
|
670–739 (Good) |
20.47% |
62.57% |
33.92% |
|
740–799 (Very Good) |
15.46% |
71.65% |
26.80% |
|
800–850 (Excellent) |
10.86% |
74.29% |
29.14% |
|
New (No Credit Score) |
33.33% |
53.33% |
26.67% |
This can be explained by credit requirements. Generally, banks tend to offer the most competitive rates out there, but are harder to qualify with than any other type of lender. If you have good to excellent credit — typically 670 or higher — they can be your best bet.
But once your credit score falls into the fair or poor range, anything under 670, your options are limited. While you may be able to qualify at a credit union, an online lender that looks at data besides your credit might be able to offer a better deal.
Our survey gives a snapshot of how Americans borrowed just before the coronavirus outbreak hit. It’s had a staggering impact on all industries, and lending is no exception.
Fewer Americans are expected to have the credit or income to qualify for a loan in the near future, at least until the economy recovers. Lenders have started tightening requirements. And in some cases, banks like Wells Fargo have been eliminating personal loan programs altogether.
But there may be some silver linings. More banks and credit unions have started to accept online applications. And many are looking into using alternative data to underwrite applications.
This means factors like your level of education, career and other indicators of stability — like how long you’ve had your phone number — can help you qualify for a high rate. It also means credit-busting incidents that are beyond your control — like an illness or divorce — won’t be as damaging to your eligibility for a loan.
Finder’s data is based on an online survey of 1,718 US adults born between 1928 and 2003 commissioned by Finder and conducted by Pureprofile in January 2021, with representative quotas for gender and age. Participants were paid volunteers.
We assume the participants in our survey represent the US population of 254.7 million Americans who are at least 18 years old according to the July 2019 US Census Bureau estimate. This assumption is made at the 95% confidence level with a 2.36% margin of error.
The survey asked people whether they have taken out a personal loan, the total amount of personal loans they have taken out for different categories, and where they got their personal loan from. Personal loan categories were Start a business, Cover medical expenses, Legal fees, Fund a renovation , Pay for a vacation, Fund a move, Help a family member, Pay for a funeral, Consolidate debt, Pay for gifts, Pay for a wedding, Bail money, and Other.
Average calculations of personal loans ever taken were based on only the participants who reported taking a personal loan in a category — for example, to calculate the average amount of personal loans taken for consolidating debt, respondents who indicated that they have not ever taken out a personal loan, and who responded “0” (meaning they have taken a personal loan for another reason listed, but have not taken a personal loan for consolidating debt) were not included. Our calculations were weighted for age and gender.
To avoid skewing the data, we also excluded extreme outliers from our calculations.
We define generations by birth year according to the Pew Research Center’s generational guidelines:
Richard Laycock, Insights editor and senior content marketing manager
25.9% of adults take out a personal loan for their home renovations
On an average:
Interest rate: 10.57%
Term: 24 months
$2,990 principal borrowed
$312.72 in total interest accumulated
28.6% of adults take out a personal loan for their wedding
On an average:
Interest rate: 10.57%
Term: 24 months
$3,082.00 principal borrowed
$302.97 in total interest accumulated
47.10% of adults take out a personal loan to finance their small business
On an average:
Interest rate: 10.57%
Term: 24 months
$7,176.00 principal borrowed
$750.53 in total interest accumulated
10.57% of adults take out a personal loan for vacationing
On an average:
Interest rate: 10.57%
Term: 24 months
$1,159.00 principal borrowed
$1280.22 in total interest accumulated
24.50% of adults take out a personal loan for medical emergencies
On an average:
Interest rate: 10.57%
Term: 24 months
$958.00 principal borrowed
$199.20 in total interest accumulated
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I need a personal loan for my vacations and for my tuition fees. Please help me.
Hi John,
Thanks for getting in touch with Finder. I hope all is well with you. 😃
You may apply for a personal loan if you are in US.
On that page, you will see a table that allows you to conveniently compare your personal loans based on the required minimum credit score, APR, and maximum loan amount. Once you found the right one for you, click on the “Go to site” green button to learn more or initiate your application.
If you are outside of the US, it would be a good idea to check your local area. Shop around until you find the right lender.
Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision. Moreover, check the eligibility requirements as well and consider whether the product is right for you.
I hope this helps. Should you have further questions, please don’t hesitate to reach out again.
Have a wonderful day!
Cheers,
Joshua