Personal loans help some get by day to day

Personal Finance

The second-most common reason given is debt consolidation (23 percent), followed by other (16 percent), moving (9.1 percent) and medical (7.8 percent).

Total household debt reached $12.84 trillion as of June 30, according to data from the Federal Reserve of New York. That’s $164 billion higher than the peak of $12.68 trillion in the third quarter of 2008 as the economy headed into the Great Recession.

While personal loans are a tiny fraction of that outstanding debt at $106 billion, according to recent data from TransUnion, it’s more than double the $45 billion of five years ago.

In recent years, many online lenders, like Lending Club and Prosper, have emerged to offer personal loans with competitive interest rates and quick approval. These loans are unsecured, which means there’s no collateral like a house or car that the lender can come after if you default.

Depending on your credit score, personal loans can come with lower interest rates than is typical with credit cards. The range for interest rates on personal loans is about 3 percent to more than 30 percent, with the best rates typically reserved for those with excellent credit, according to ValuePengion. In comparison, the average interest rate on credit cards is about 16 percent.

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