New data reveals that personal loans are the fastest growing consumer lending category. Outstanding balances of personal loans jumped around 18 percent to $120 billion in the first quarters. The percentage of loans originated by FinTech firms is also growing at a rapid pace. In 2010, they originated less than 1 percent of personal loans. According to Bloomberg, they originated 36 percent in 2017.
What is a personal loan? This financing option is known as “unsecured” debt, since they are not backed by collateral like a mortgage or auto loan. The borrower’s credit score is used to determine whether or not they qualify and at what interest rate.
Personal loans have been around for a very long time. Remember ‘It’s a Wonderful Life’, George Bailey and his personal loans? But it is FinTech lenders that should take credit for reinvigorating this loan category. Web-based firms like LendingClub, Social Finance Inc. and Prosper Marketplace Inc. have been a major force behind personal loan growth.
Last October, Goldman Sachs launched Marcus. This online platform offers unsecured personal loans to consumers. At that time, the company told creditworthy borrowers that they could apply for a fixed-rate, no-fee persona loan of up to $30,000 … Read the rest