Demand for consumer credit surges as the impact of interest rate increases and inflation hikes people's cost of living. One in three personal loan borrowers say they need the money to supplement lost income, which raises the question of a 'debt hangover' to come.
By Steve Cocheo, Executive Editor at The Financial Brand
The “classic” use of personal loans today has been consolidation of debt, notably credit card bills, in order to bring down the overall interest rate. Research by J.D. Power found that one in five consumers surveyed have applied for personal loans in the last year. Out of that, 34% said that they did so to supplement lost wages.
The company found that people under 40 cited this reason most frequently — 39% of that age category said they borrowed to make up for lost income.
Jennifer White, Senior Director, Global Banking and Payments Intelligence at J.D. Power, says the firm’s research indicates that inflation is beginning to bite more consumers. White notes that 64% of consumers are considered financially unhealthy in the firm’s current research.
White says that 68% of people who receive personal loans say they are not in a better financial position than they were before. “That, to me, is sobering,” says White.
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