NEW YORK–For the first time, during the second quarter of this year lenders mailed out more offers for personal loans than credit cards, according to new data.
It has led to consumers being hit with an increasing number of offers for loans, including those with poor credit histories.
The marketing pitches offer promises of ways to pay down other debts or fund home renovations or vacations, fueling concerns that customers could overextend themselves, according to a Wall Street Journal analysis. Among the companies behind the unsolicited offers are American Express, Goldman Sachs and Lending Club, which are offering personal loans up to $100,000, according to the Journal.
In all, lenders mailed a record 1.26 billion solicitations for these loans, according to market-research firm Competiscan, the Journal said. The second quarter marked the first period that lenders mailed out more offers for personal loans than credit cards, a much bigger market, according to research firm Mintel Comperemedia, the Journal reported.
“While the market for personal loans is relatively small, it is growing quickly. Lenders extended $81.9 billion in personal loans to U.S. consumers in the first half of the year, up about 13% from a year prior, according to credit-reporting firm Experian PLC,” the Journal said. “That compares with a 9% rise in auto loans and leases and a 5% boost in spending limits issued on new general-purpose credit cards over the same period. The surge in unsecured personal loans is the latest sign that banks and financial-technology companies alike are plunging with new vigor into a risky area of consumer finance, reflecting both the solid growth of the U.S. economy and the perception that growth opportunities remain scarce for lenders nearer the top of the U.S. personal-income distribution.”
Concern Over Debt Levels
The Journal added that some researchers are concerned the surge in personal loans will enable consumers to take on more debt than they can pay back. As CUToday.info has reported on several occasions, data show an increasing number of households are experiencing financial difficulties or are a missed paycheck or two away from doing so.