According to predictions from TransUnion, a significant consumer credit rating firm, American consumers will default on their credit card and personal loan payments at the highest rates since 2010, according to Reuters.
After a year in which consumers maxed out their credit cards, loan delinquencies will soar, according to a study released by TransUnion. According to the research, Americans opened a record number of new credit cards (87.5 million) and personal loans (22.1 million) in 2022.
According to Michele Raneri, manager of TransUnion's U.S. research and consulting, consumers confront considerable financial difficulties, including "rapidly rising interest rates and stubbornly high inflation paired with recession fears."
Over half of the 2,800 Americans surveyed were upbeat about their finances for the coming year despite the economic slump, according to TransUnion. The younger generations showed the most confidence.
What is a personal loan?
A personal loan is a long-term financial product, most often unsecured, that is, not requiring collateral. Personal loans usually have fixed rates, long-term payments, and fairly low-interest rates.
When borrowers take a personal loan, they can count on the amount of $ 1,000 to $ 50,000, with a payment term from 12 months to 64 months.
It may take some time for a loan to be approved while the lender performs the necessary credit checks on the borrower. If the application is approved, the loan amount will be sent to the borrower's account after signing the loan agreement. After the receipt of funds, the loan period begins, during which the borrower will have to make monthly payments. They consist of part of the loan amount and interest. The loan will be considered closed after the last payment when the entire loan amount, interest, and fees have been repaid.
A personal loan is not a mortgage, so it's possible to spend it on those purposes that are a priority for borrowers. For example, personal loans are used for debt consolidation, major purchases, home or car repairs, weddings, funerals, vacations, and other needs.
The borrower can get a personal loan from traditional lenders, such as a bank or credit union, as well as from private lenders.
Traditional lenders are usually more popular because they offer lower interest rates. At the same time, traditional lenders conduct hard credit checks. It not only lowers the borrower's credit rating but also restricts those whose credit score is below 670.
Private lenders often charge higher interest rates. At the same time, they can work with borrowers whose credit history is not perfect, providing them with personal loans, however, at even higher rates. For example, if a private lender offers a personal loan at 9.6% for bad credit borrowers, it could become a personal loan at 17.6% APR.