The personal loan market reached an all-time high last year, as the emerging financial technology (fintech) industry has made mobile financial services more convenient and available to consumers.
Last year, the personal loan market reached $138 billion, a surge of 17% year over year, according to TransUnion data, reported by CNBC. Fintech lending made up 38% of all personal loans, up from just 5% in 2013—and these companies are on the rise.
A July report published by the U.S. Department of Treasury says that more than 3,300 fintech companies started from 2010 to 2018, with investments in these startups growing rapidly. In 2017, global investments in fintech companies reached $22 billion. These companies are the main driver behind personal loan market growth.
“The rapid growth in consumer loans sits squarely on the shoulders of fintechs,” Jason Laky, the senior vice president and leader of TransUnion’s consumer lending told CNBC.
Americans are in a lot of debt, with more and more people unable to pay it off. In 2018, student loan debt reached a new high of $1.5 trillion, followed by auto loan debt at $1.1 trillion, and credit card debt at $977 billion. The average total amount of debt carried by American households is $133,568, according to Forbes.
For people borrowing subprime loans—either because of low-income or a poor credit history—the risks are the highest in the case of an economic recession or crisis. This tier of borrowers, who risk losing their jobs or work hours is also growing the fastest, at 4.3% year over year, according to TransUnion.