Personal loan originations from the top 100 lenders are up 118% over the last four years with fintech companies driving the growth, Credit Karma data reveal.
Fintech personal loan originations increased more than 940% among the top 100 lenders from 2013 to 2017. That’s up about $11.7 billion in four years, according to an analysis of personal loan data for more than 15 million Credit Karma members in the U.S. (Learn more about our methodology.)
That’s compared to a 93% increase for bank originations and 42% for credit union originations in the same time period and within the same top 100 group.
What’s more, as fintech loan originations grew, storefront originations lost some ground, dropping 10% from 2016 to 2017.
Additional key findings
| Fintech companies originated 34% of personal loans in 2017, compared to just 7% in 2013 among the top 100 lenders. |
| Credit card refinancing is the top reason Credit Karma members seek personal loans, followed by unexpected costs, making a major purchase and home improvement, according to self-reported data. |
| Millennial Credit Karma members in the U.S. shoulder the least amount of personal loan debt compared to other generations, with about $11.8 billion in collective personal loan debt. |
| Gen X members hold the majority (53%) of personal loan debt, with a collective balance of about $26.6 billion. |
Fintech companies poised to maintain lead
Banks and storefronts led the top 100 personal loan origination space in 2013, according to Credit Karma’s analysis.
At that time, bank originations made up 33% of the top 100 personal loan market and storefront originations made up 43%. Fintech originations lagged behind, hovering at 7% of the market.
The landscape began to change from 2013 to 2014, and by 2015 fintech originations nearly matched those of banks. They eventually surpassed banks and storefronts in 2017 to move into the top spot for personal loan originations.
Fintech personal loan originations held a steady lead, ending 2017 with originations about 17% greater than banks and 32% greater than storefronts.
According to the analysis, the top 10 fintech companies leading the charge in 2017 were:
| 1. Lending Club |
| 2. SoFi |
| 3. Prosper |
| 4. Marcus by Goldman Sachs |
| 5. Best Egg |
| 6. Avant |
| 7. Upstart |
| 8. Rise |
| 9. FreedomPlus |
| 10. NetCredit |
People turn to personal loans to help with credit card debt and unexpected costs
In an analysis of self-reported data, Credit Karma found that nearly 40% of its U.S. members seeking personal loans — from a fintech company or otherwise — wanted a loan for credit card refinancing. And 27% said they wanted a personal loan to help cover an unexpected cost.
| Loan purpose | % of loan seekers |
| Credit card refinancing | 38% |
| Cover an unexpected cost | 27% |
| Major purchase | 13% |
| Home improvement | 9% |
| Other | 7% |
| Debt consolidation | 6% |
Loan purposes were self-reported by approximately 1.5 million Credit Karma members in the U.S. who sought prequalification for a personal loan between January and March 2018.
The same analysis also found that approximately half of people who sought personal loans of $30,000 or more were looking to borrow an amount that represented more than 50% of their annual income.
Despite growth, personal loan debt is smallest piece of the full debt picture
When it comes to total debt, personal loans make up a small portion: Only 1% of the overall debt that Credit Karma members carry is personal loan debt, based on a June 2018 analysis of more than 60 million members in the U.S.
But even though personal loans represent a relatively insignificant piece of the total debt picture, a single personal loan can represent major debt in a person’s life.
Credit Karma found that among its analyzed members, millennials with personal loans have more than $5,400 in personal loan debt on average, while Gen Xers with personal loans have more than $8,200 on average in personal loan debt. Baby boomers average out at more than $7,900.
Gen X members also shoulder most of the personal loan debt burden, collectively holding 53% of all personal loan debt.
As for total debt, mortgage and student loan debt make up the majority of the puzzle, comprising 62% and 13% of members’ total debt, respectively.
Tips for smart personal loan use
- Before you borrow, make sure the lender is legitimate. Many fintech and online lenders have cropped up in recent years. If you’re not sure whether you can trust a lender, consider cross-checking the company’s name with the Consumer Financial Protection Bureau or Better Business Bureau before applying.
- Make sure a personal loan is your best option. Personal loans can certainly provide the cash you need for a handful of financially demanding scenarios. However, a personal loan may not necessarily be the best option for your situation. Make sure to shop around and consider your full suite of alternatives. For example, are you considering a personal loan to help alleviate your credit card debt? If you have good credit, you may qualify for a balance transfer credit card with a 0% intro APR (annual interest rate). If you can pay off that balance before the introductory rate ends and the interest rate goes up, a balance transfer card may be a better option.
- Know your APR and fees. Personal loan APRs and fees can vary from lender to lender, and the APR can make a big difference in how much you pay over the life of your loan. Before you sign on the dotted line, be sure you look for the best interest rate for you (APRs typically range from around 5% to 36% depending on your credit health and the lender). Also ask if the lender will charge an origination fee, and be aware of any prepayment penalties. That’s right, some lenders charge a fee if you pay off your loan early.
Methodology
To compare growth of personal loan originations over time, Credit Karma analyzed personal loan origination data contained in credit report data from 2013 to 2017 for more than 15 million Credit Karma members in the U.S. who are currently enrolled in Credit Karma credit monitoring services and have opened a personal loan since 2013. To determine the top 100 lenders, Credit Karma narrowed its analysis to look at the 100 lenders with the most personal loan originations for each year. The top 100 lenders comprised 63% of the total personal loan originations for 2013-2017. To determine how to classify each lender — bank, storefront, credit union, fintech or other — Credit Karma developed definitions for each lender type based on industry terms and definitions, then sorted each of the top 100 lenders into its respective category based on its adherence to each category’s definition.
To determine how much debt and the type of debt members carry, Credit Karma analyzed June 2018 credit report data for more than 60 million Credit Karma members in the U.S.
To determine why people apply for personal loans, we drew on information provided by approximately 1.5 million U.S. Credit Karma members who sought prequalification for a personal loan through Credit Karma’s website or mobile app between Jan. 1 and March 26, 2018. In the prequalification process, members self-report individual annual income and their reason for seeking a personal loan. Prequalification applicants may or may not have applied for and received approval for a personal loan through one of Credit Karma’s marketing partners.
The percentages reported in this article have been rounded to the nearest whole percent.