Personal loans are the fastest growing consumer lending product in the US, as more and more Americans are taking out unsecured loans to consolidate debt or fund a large expense. What may come as a bit of a surprise, however, is which generation is leading the way in personal loan growth — millennials.
From 2014 to 2019, the average personal loan balance per millennial (birth year: 1981 to 1996) increased by 44%, more than double the growth of any other age group. By comparison, personal loan debt for baby boomers grew by only 2% over that span. Still, while millennials are taking out personal loans at the most advancing rate, they still carry a much lower average balance ($11,819) compared to baby boomers ($19,253) and Generation X ($17,175).
Why is personal loan use increasing among millennials? For starters, as millennials graduate from college and enter the workforce, many already have experience taking out loans in the form of student loans — the second highest consumer debt category in the US after mortgages. Beyond that, millennials manage a lot of their finances online and are drawn to fintech, which just so happens to be driving the overall growth of personal loans.
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What are millennials using personal loans for? While older borrowers use personal loans for home improvement projects, travel, and costly medical bills, millennials have their own specific needs. Below are some examples.
With the average American wedding costing $30,000, personal loans can be used to pay for the entire event or part of the celebration (e.g., booking the venue, caterer, or photographer). Online lenders have experienced over 100% annual growth in wedding loans, with some of those lenders pointing to millennials as their most frequent borrowers.
Moving can be rather expensive, and millennials are on the move more than any other generation. With that said, personal loans can be an option for those who need to cover moving costs, especially when it’s a long distance migration. A personal loan can cover larger moving expenses like travel, rental deposits, and buying new furniture.
Finally, with 25% of millennials claiming credit cards as their most burdensome balance, personal loans are becoming an increasingly popular option to consolidate or refinance high-interest card debt. A personal loan can provide borrowers with a lower interest and monthly payment, depending on their creditworthiness.
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Personal loans give everyone, including millennials, the opportunity to consolidate and refinance debt, or fund a major life expense. When used responsibly, personal loans are also a great way to build your credit score through timely, in-full payments. For millennials interested in personal loans, it's simply a matter of choosing the right offer for their specific needs.