Here’s why high credit score borrowers spend the most on personal loans

Personal loans are often used by high credit score borrowers to consolidate debt, make major purchases, or cover unexpected expenses. Because personal loans typically have lower interest rates than credit cards, they can be a more cost-effective way to borrow money. High credit score borrowers tend to be able to qualify for the best personal loan rates, which can save them money on interest over the life of the loan. 

Personal loans can also help high credit score borrowers build a positive credit history, which can improve their credit scores even further. Use this personal loan payment calculator so you can estimate payments based on your credit score.

The statistics

Personal loans are becoming increasingly popular, as more and more people look for ways to consolidate debt or finance major purchases. But what do the personal loan statistics reveal about this growing trend?

Personal loan volume has grown steadily over the past few years, reaching a record high of $177.9 billion in unsecured personal loan balances this year. However, it’s not all bad news. 60-day delinquency rates are less than they were before the COVID-19 pandemic, at 3.25%. Interest rates are also very low, with an average of just 9.41% for a 24-month loan. The biggest growth in loan origination is for those with low credit scores, as personal loans can be an attractive option to consolidate other types of debts. 

The average balance of an unsecured personal loan is hovering around $9900. This number is very high, and can likely be attributed to an increase in the need for loans in 2021 to cover lost wages and increased cost of living throughout the pandemic. The percentage of personal loan debt by credit score gives very interesting information on the status of these loans.

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Those with credit scores of 721 and above make up almost a third of all personal loan debt (30.9%) as of March 2022. This is 3.1% lower than in March 2021. In contrast, those with credit scores of 660 and below hold 45.1% of personal loan debt, up from 40.2% in the same time frame. 

The average new loan amount for those with the best credit scores is over $15,000 higher than for those with the worst credit scores. This is likely due to those with low credit scores being seen as high-risk borrowers, so lenders are less likely to loan large amounts of money. Delinquency rates of subprime borrowers are almost 14%, while 0% for superprime borrowers. 

Given these trends, it’s clear that personal loans are becoming an increasingly important part of the financial landscape. Make sure to only borrow what you need and pay your bill on time.