Key insights
- Rising personal loan usage indicates consumers are struggling with inflation and tariffs, potentially increasing debt burdens. This trend, expected to continue into 2026, suggests weakening consumer health. Increased borrowing to cover expenses may signal reduced discretionary spending and potential negative impact on equity valuations, especially for consumer discretionary companies.
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Tariffs drove up prices last year, pushing more consumers toward personal loans to cover expenses. With inflation set to stick around, that trend is expected to continue into 2026.
A significant number of Americans have a personal loan, a type of credit issued directly by a bank, credit union, or online lender. In 2025, more than one in three (38%) Americans had a personal loan. And that number is rising: Since 2017, the portion of consumers with this type of loan has increased by about seven percentage points.
Higher prices are pushing more households to borrow to cover everyday costs. That trend could increase consumer debt burdens if rates stay elevated.
Many consumers have been struggling with inflation since the COVID-19 pandemic. And more recently, widespread tariffs have further increased prices, squeezing household budgets.
Tariffs have already raised the cost of pricey items like cars and home renovation supplies. Various other costs, such as car repairs and medical expenses, have similarly increased.
Still, if you're like most American consumers, you didn't stop spending in 2025. Instead, you might have done what more people are doing: get a loan to bridge your budget gap. The amount Americans held in personal loans in 2025—$597.6 billion—increased 7.6% from 2024.
The average consumer balance last year was $19,333, a 13% increase from 2021.
The vast majority of consumers—about 95% as of July 2025—hold credit card debt, compared with 38% who have a personal loan. Still, interest in personal loans is rising: In 2025, there was a 16% increase in hard inquiries related to personal loans compared to 2024.
In a January 2026 survey, about half of consumers said they're more likely to take out a personal loan this year. The most common reason was to pay for a major purchase. The second most common reason was to cover an emergency expense.
Additionally, 42% said they would likely take out a personal loan in 2026 because of economic conditions over the last 12 months, up four percentage points from a 2024 Experian survey.
Consumers said they are more likely to take a personal loan to help them cover expenses in the future and, at the time, said they expected interest rates to fall in the near future.
Interest rate cuts would make borrowing less expensive and personal loans more enticing. However, the Federal Reserve—which controls the federal funds rate—is unlikely to lower the benchmark rate in the near future. The fed funds rate influences rates on all kinds of borrowing, including personal loans.
As of March 20, traders are predicting only a 3.4% chance of a rate cut by the end of the year, according to CME's FedWatch tool, which forecasts rate movements based on fed funds futures trading data.