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Demand for short term loans grows as inflation prices pressure consumers

Nov 12

A personal loan can be a lifesaver for many Americans. With consumer prices rising faster than expected, inflation is leading to lower personal income and reduced spending power. Inflation has grown at the highest level in the past thirty years, with the 3rd quarter inflation report for 2021 coming in at over six percent. Prices have surged on groceries, energy prices, and household building products.

The surge in Q3 Consumer Inflation Pressures Consumers to Make Ends Meet

The personal loan market is expected to see a record-breaking year in terms of both volume and personal loan value. In the past, personal loans have been used for short-term expenses such as vacations or home renovations. Now, personal loans are being used more frequently by consumers struggling with inflationary pressure on their incomes.

For example, Alex Taylor, a moderate-income construction worker in New York City recently took out a personal loan to offset the impact of high prices on his weekly shopping bill. Mr. Taylor stated that he makes roughly $1500 per week for 8 hours of work which equals an hourly wage of $188 after taxes and deductions (including unemployment insurance). Without the personal loan, Mr. Taylor's weekly grocery bill would be around $400 but because of personal loan, his weekly grocery bill is $360. That's a savings of $40 per week which equals saving around $2000 per year.

Although personal loans are more accessible than ever before, Mr. Taylor stated that he would prefer not to take out the personal loan but he has no other choice as if he wants to have some money left at the end of the month for health insurance then "there just isn't any alternative".

As personal loans become less stigmatized and more readily accessible, demand for personal loans is expected to rise at an annual rate of ten percent over the next five years compared to the average personal loan growth of 2.8% over the past five years.

Surging Gas Prices Have Force Consumers To Scale Back and Struggle With Everyday Expenses

As personal income is declining and personal borrowing rates stay at record-breaking lows, personal loans are becoming an increasingly common way for consumers to offset inflationary pressure on personal expenditures.

"We see personal loan demand picking up as more people try to restore some stability to their personal balance sheets by taking out personal loans or tapping into their home equity," said Vice President of Marketing of Big Sky Cash Loans, Brad Rivers. "At the same time, we don't think this recent growth in personal loan activity is indicative of a tightening lending environment."

"In fact, we expect interest rates on personal loans will continue at historically low levels over the next five years as banks and credit unions look to expand their consumer base beyond those with high-risk profiles," Mr Rivers concluded.

Demand for personal loans is expected to rise at an annual rate of ten percent over the next five years compared to the average personal loan growth of 2.8% over the past five years.

Personal loans are short-term personal loans that are often used by consumers to cover unexpected expenses, emergencies, or other personal costs. Although personal loans have become more accessible in recent years, consumer inflation has caused personal income and personal spending power to decline, forcing many Americans to take out personal loans in order to meet their household expenses. Other common uses for personal loans include debt consolidation, home repairs, business start-up funding, weddings & honeymoons, and other personal expenses.