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Inflation has personal loan balances surging

As consumers adjust their household budgets and living expenses to counter the effects of high inflation, recent findings show such rising economic costs are contributing to the increased balances for unsecured personal loans.

According to CUNA Mutual Group, credit union members are borrowing at record numbers, especially unsecured personal loans. In May of this year, credit union loan balances increased 14.6 percent, the fastest yearly rate since May 1995. Unsecured loan balances grew by 3 percent in the same period while other types of loan balances increased 2.3 percent, per the report. 

Kenny Cooper, vice president of lending at Neighborhood Credit Union, said the cooperative experienced significant growth in unsecured loans year-over-year and foresaw that it would continue as consumers find solutions to negotiate rising costs. 

“If a consumer is looking to take out unsecured debt, a credit union is the best option,” Cooper explained to Fox Business. “Not only do credit unions cap their interest rates . . . the personal relationship credit union members have with their credit unions can make it easier to secure loans. Credit unions tend to provide loans to those individuals who may have been underserved or overlooked by larger financial institutions.”

Many financial institutions were already under interest rate pressure on personal loans from such personal finance companies like SoFi, and new data reveals that credit unions are taking a larger section of that lending pie. 

“Many credit union members are taking on debt before interest rates rise further [to combat inflation] and to consolidate other loans,” said Steve Rickchief economist for CUNA Mutual Group. “We expect this trend to continue for the next six months before slowing in 2023. when interest rates will be reaching their peak.”

Consumers called, personal loans delivered in response to inflation

Personal loan debt reached $192 billion in the second quarter of 2022, according to TransUnion, a 31 percent increase since 2021. Consumers also took out larger amounts of money in response to rising inflation, the average loan amount totaling just over $8,000, compared to $7,000 at the same time last year. 

One significant driver of loan activity over the last three years was the increased number of fintech companies like QCash Financial that answered the call after the COVID pandemic made in-person banking inaccessible. The pace of innovation mixed with the effort among fintech companies is reinventing the necessity to increase access to personal loans whenever and wherever the consumer needs it.

Credit unions, particularly, offer inherent and unique organizational features that offer a much more personal member experience while saving capital by partnering with a fintech like QCash that can provide an easy onboarding experience. The process requires minimal maintenance while giving members a near-instantaneous mobile application experience that can literally change the trajectory of their lives and the lives of their families during these unpredictable and inflationary times.

If your credit union member experience finds itself considering an easy-to-manage, easily implementable small dollar lending platform, we invite you to go to our website and view a demo of the QCash Life Event Lending platform. 

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