More Americans than ever are turning to personal loans. Here’s what’s driving it.

Americans are increasingly using personal loans to help manage their finances, according to a recent report from credit bureau Experian.

As of 2025, a record 38% of consumers have at least one personal loan — up from 30.9% in 2017. Over that eight-year period, personal loan use has consistently risen. Personal loan balances are on the rise too. While not quite as high as they were two years ago, balances increased between 2024 and 2025 to an average of $19,333.

“U.S. consumers continue to spend, based on recent retail sales figures, and credit card balances continue to climb,” the report said, noting that record-high interest rates on credit card balances may be prompting more consumers to search for lower-cost ways to manage that debt.

Consumers are increasingly turning to personal loans as a “mainstream household finance tool,” Rakesh Patel, executive vice president for Experian Consumer Services Marketplace, said in the report, adding that both loans and balances have increased across different borrower segments.

The survey also showed that roughly half of Americans say they will take out a personal loan in 2026 as rising inflation and tariffs continue to drive up costs.

Here’s a closer look at Americans’ growing interest in personal loans and what to know before you apply for a loan this year.

Read more: Best personal loans for 2026

Debt consolidation is a common reason to use a personal loan if you’re working to pay down high-interest credit card debt. But many borrowers are using their loans for different reasons, Experian’s report shows.

Compared to 2024, American consumers today are more likely to cite major purchases, emergency expenses, home improvements, vacation, medical expenses, and education as reasons they would use a personal loan.

Between rising prices and relatively low interest rates, personal loans can be a useful tool to help you achieve your financial goals and manage your spending at potentially lower cost than other borrowing options.

A changing economy could be one reason Americans are taking on more personal loans. The Experian report said personal loans are becoming more popular as a lower-rate option to manage debt balances and rising costs.

The most recent Credit Industry Insights report from TransUnion also shows consumers turning to personal loans, with a record number of quarterly unsecured personal loan originations in the last quarter of 2025. “For many households, personal loans offered a financial release valve — a way to consolidate, cover gaps or manage lingering inflationary costs,” the TransUnion report said.

In Experian’s report, 42% of consumers said recent economic conditions are making them more likely to take on a personal loan in 2026, while just 12% of respondents said economic conditions make them less likely to get a personal loan.

Personal loan rates tend to follow federal interest rate changes — which means downward-trending rates over the past couple of years could account for some of the growing interest in loans.

“Rate cuts have been a powerful near-term catalyst — they make refinancing materially more attractive and help convert consumer interest in the category into actually acquiring the loan,” Patel said in the report.

Credit card rates are affected by Fed rate changes, too, but credit cards tend to have much higher rates overall. Currently, average credit card rates are above 20%, and more than 22% for accounts with assessed interest. Personal loans, on the other hand, have average rates around 11% — close to half the average credit card rate.

At its most recent FOMC meeting in March, the Fed opted to hold its benchmark rate steady following a series of rate cuts through 2024 and 2025. Stagnant rates could be a trend this year: The Fed still expects just one rate cut throughout the rest of 2026. But even small movements can help borrowers over the long run.

“Because personal loan pricing typically moves with the federal funds rate, even a 1 percentage point decline can translate into materially lower monthly payments and make refinancing higher-cost revolving debt substantially more attractive,” Patel said.

If you’re thinking about applying for a personal loan this year, it’s important to understand the different features of your loan to find the right fit for your goals.

Here are a few things to consider:

Unsecured vs. secured: Many personal loans are unsecured, meaning you don’t need to put down any collateral to open the loan. Because there’s no security for the lender, unsecured loans can require better credit to qualify. Secured personal loans require a form of collateral up front, like a savings account or vehicle. Secured personal loans may be easier to qualify for, but they’re less common, and you could lose the asset you put down as collateral if you don’t pay.
APR: Personal loan interest rates are often lower than high-interest credit card APRs today, but they can still be costly. According to Federal Reserve data, 24-month personal loans carry an average 11.65% APR today. In general, you can find personal loan rates as low as about 6% — but you’ll need a great credit score when you apply to qualify for the lowest rates today.
Origination fees: Origination fees are common among personal loan charges. They’re often a percentage of the amount you borrow, ranging from 1% up to 10% of the loan amount. Make sure you account for this cost when you consider the total cost of your loan.
Loan term: Lenders offer wide-ranging personal loan terms, generally from less than one year to longer than seven years. The term length can affect your monthly loan payment and the amount of interest you’ll accrue (and your overall repayment amount), so it’s important to choose a term that works with your budget.
Loan amount: Like term length, your personal loan amount can vary a lot. You may find lenders who let you borrow as little as $1,500 or $2,000, or as much as $50,000. The information in your application, including your credit score, can affect how much you qualify to borrow. You should also consider how much money you need and what you can afford to repay each month.
Prepayment penalty: Some lenders charge a penalty for paying your loan off early. While prepayment is a great way to save on interest charges, this penalty could offset those savings. Look for details about the prepayment penalty within your loan agreement or on the lender’s website before you sign.