More Americans Than Ever Are Relying on Personal Loans

Personal loans have become increasingly popular among consumers as they seek ways to manage their growing expenses. According to Experian data, the percentage of Americans with personal loans hit a record high in 2025, with almost four in 10 adults now utilizing this form of borrowing.

The report highlights that the continuous rise in personal loans can be attributed to the increasing retail sales figures and climbing credit card balances. With record-high interest rates on existing credit card debts, many consumers are turning to personal loans as a lower-cost alternative to manage their financial obligations.

While personal loans offer a less draining option compared to high-interest credit cards, taking on unsecured debt with average rates above 10% is not always the ideal solution. However, the trend of personal loans has been consistent over the years, with the percentage of consumers with this type of debt increasing annually for almost a decade. The total number of personal loans on credit reports has reached 67.5 million, with 30 million being unsecured loans that typically carry higher interest rates.

It is worth noting that personal loans can be a strategic tool for refinancing and consolidating higher-interest debt for consumers with strong credit. These borrowers can secure personal loans with rates as low as 7% or 8%. However, for individuals with lower credit scores, personal loans can be as expensive as credit cards, with APRs exceeding 30%.

The average personal loan balance stands at $19,333, with a Federal Reserve-reported average rate of 11.65% for a two-year loan. Borrowers could end up paying over $180 per month in interest initially, and even after a year of payments, they may still be paying over $100 in interest monthly. Additionally, opting for longer loan terms, often up to 5 or 7 years, to reduce monthly payments can lead to higher APRs.

Despite the potential drawbacks, personal loans can help consumers manage credit card debt that is impacting their credit scores. Moreover, when interest rates decrease, personal loans can offer a viable option for paying off higher-interest debt, effectively swapping one debt for another with a lower rate.

Recent interest rate cuts have fueled increased activity in the personal loan market, with consumers seizing the opportunity to refinance at lower rates. While the Federal Reserve has maintained steady interest rates, previous rate cuts have prompted a surge in personal loan borrowing at more favorable terms.

In conclusion, personal loans have become a valuable financial tool for many consumers seeking to navigate their financial challenges. However, it is essential for borrowers to carefully evaluate the terms and rates of personal loans to ensure they make informed financial decisions.