The Credit Union National Association (CUNA) have found, following findings from December 2021, that personal loans are the highest demand product offered by the unions overall across the US. Throughout December 2021, the quantity of unsecured loans taken out grew by 2.5%, while credit card consolidation loans jumped by 2.3%. Of their range of financial products, including mortgages, these products saw the highest growth. Credit Unions are renowned for their non-profit nature, making their loans cheaper to borrow than from high-street lenders.

What Are Personal Loans?

Personal loans are an unsecured form of debt, meaning that no collateral is declared within the contract. This means that if a borrower fails to pay back their loan, their house, car, or any other asset is not going to be seized. Rather, they will be chased by the Union (or any other creditor) until their debts are paid off.

Personal loans are similar to payday loans. These loans are intended to cover urgent and unforeseen events, with 12 million Americans making use of payday loans each year. Meanwhile, there are over 5,400 Credit Unions in the US. Credit Unions are heavily turned to by citizens of states which prohibit the use of payday loans. Given that Credit Unions are not driven by profit, their pool of  funds are often smaller than those of high-street or payday lenders. This means that they can, sometimes, only offer smaller loans. For those who need sizable lump sums of cash, they often turn to alternative sources of funding.

Why Is Demand For Personal Loans Rising?

The Covid-19 crisis plunged many into financial ruin, with employment falling and many Americans encountering unforeseen medical bills. That explains why demand for personal loans is on the up. Typically, these loans are used to cover medical costs, dental bills, home repairs, funeral costs, and much more. This explains why from 2021 to 2022, the US has seen a 0.3% rise in the number of Credit Unions.

The popularity of personal loans is only expected to increase given the rising consumer demand that America is experiencing. With retail and food industries beginning to thrive again, we can expect credit usage to rise. While this may also be in the form of increased use of credit cards, it will also incite a rise in personal loans.

Not only is consumer retail demand rising, but so too is the cost of living. This means that customers not only want to spend more, but they simultaneously need to spend more to cover their basic costs of living. In the period connecting January 2021 and January 2022, the Consumer Price Index – a measure of inflation – increased by an astoundingly high 7.5%. The ripple effects of this have reached far and wide, but most importantly, are causing energy bills to soar, making necessary bills a heavier burden.

As such, it is likely that this trend towards personal loans will continue. If you, or a loved one, are considering taking out a loan, it is essential that you have a means of repayment. Failing to repay your debt can land you with further financial issues, such as debt overload or a damaged credit score.

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