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Unsecured Loans - US - March 2016

Published By :

Mintel

Published Date : Mar 2016

Category :

Banking

No. of Pages : N/A

As with other areas of financial services, technology is bringing about radical change in the unsecured lending arena. P2P (peer-to-peer) lenders are challenging traditional lenders with their lower interest rates, online capabilities, and easy access to funds. The target markets for P2P lenders are the segments all lenders want most

Table of Content

Overview

What you need to know
Definition

Executive Summary

The issues
Rising interest rates
Figure 1: Effective federal funds rate, Jan. 1, 2007-Jan. 1, 2016
Millennials are wary of credit
Figure 2: Attitudes toward debt, by generation, December 2015
The opportunities
Interest rate is key in choice of lender
Figure 3: Reason for choosing lender, December 2015
P2P lending has only just begun
Figure 4: Have P2P debt, by generation, December 2015
Partnering with P2P lenders can benefit banks
Figure 5: Attitudes toward borrowing, December 2015
What it means

The Market – What You Need to Know

Total debt is trending up
Consumers are paying down credit card balances
Student loan balances continue to grow
Rising interest rates make borrowing less attractive
Income is down

Market Size

Total debt is trending up
Figure 6: Total US consumer debt, Q3 2010-Q3 2015

Market Breakdown

Consumers are paying down credit card balances
Figure 7: Credit card data*, Q3 2010-Q3 2015
Credit card delinquency rates are down
Figure 8: Credit card delinquency rates, Q3 2010-Q3 2015
Student loan balances continue to grow
Figure 9: Student loan balances, Q3 2010-Q3 2015

Market Factors

Rising interest rates make borrowing less attractive
Figure 10: Effected federal funds rate, Jan. 1, 2001-Jan. 1, 2016
Income is down
Figure 11: Median US income, 2005-14
Increase in college expenses
Figure 12: Average tuition and fees, selected years 1975-76 through 2015-16

Key Players – What You Need to Know

P2P lending is growing and disrupting the marketplace
Big financial institutions are gearing up to fight
Millennials don’t like debt
Institutions are taking over P2P loans
Point-of-sale loans
Alternative lending models

What’s Working?

P2P lending is growing and disrupting the marketplace
Lending Club
Figure 13: Lending Club online ads, 2015, 2016
Figure 14: Lending Club direct mail ad, 2015
SoFi
Figure 15: SoFi email ad, January 2016
Figure 16: SoFi mobile ads, 2016

What’s Struggling?

Big financial institutions are gearing up to fight
Millennials don’t like debt
Figure 17: Attitude toward debt, by generation, December 2015

What’s Next?

Institutions are taking over P2P loans
Point-of-sale loans
Alternative lending models
Goldman Sachs is building its own platform

The Consumer – What You Need to Know

Credit card debt is most popular type of unsecured debt
Millennials’ lending activities
They have the most installment debt, a little less credit card debt
Millennials research and apply online
Millennials are in a quandary about credit cards
Millennials’ and high earners are challenges for P2P lenders
Interest rate is the most important factor
Existing relationships are most important to older consumers
Relatively few consumers have less debt now than a year ago
Many borrowers make more than the minimum monthly payment
Most are uncomfortable with debt, but realize they need it
Most have solid credit scores

Who Has Unsecured Debt?

Credit card debt is most popular type of unsecured debt
Figure 18: Type of unsecured debt carried, December 2015
Young women have more student loans
Figure 19: Have student loans, by gender and age, December 2015
Millennials have the most installment debt, a little less credit card debt
Figure 20: Type of unsecured debt carried, by generation, December 2015
Parents are more likely to have unsecured debt than non-parents
Figure 21: Type of unsecured debt carried, by parental status, December 2015
Payday loans are more popular among high earners
Figure 22: Consumers with payday loans, by household incomes, December 2015

Purpose of Unsecured Loans

Most get a bank or credit card loan to buy a car
Figure 23: Purpose of unsecured loan, by type of loan, December 2015
Low-income earners and parents use bank loans for bills
Figure 24: Purpose of unsecured loans, by household income and parental status, December 2015

Important Factors in Choosing a Lender

Interest rate is the most important factor
Figure 25: Most important factors in choosing lender, December 2015
And interest rates matter most to Gen X and Baby Boomers
Figure 26: Most important factors in choosing lender, by generation, December 2015
Existing relationships are most important to older consumers
Figure 27: Most important factors in choosing a lender, by generation, December 2015
Hispanics are concerned about cash flow and credit score
Figure 28: Most important factors in choosing lender, December 2015

Online Loan Activities

Millennials research and apply online
Figure 29: Online loan activities, by generation, December 2015
Parents are more likely to go online
Figure 30: Online loan activities, by parental status, December 2015

Loan Management

Men and Whites have less debt now than a year ago
Figure 31: Loan payment behavior, by gender and race, December 2015
Many borrowers make more than the minimum monthly payment
Figure 32: Loan payment behavior, by generation, December 2015
Hispanics are more likely to make only minimum payments
Figure 33: Loan payment behavior, by Hispanic origin, December 2015
Women focus on paying down loan with higher interest rate
Figure 34: Loan payment behavior, by gender, December 2015
Higher earners focus more on loan with higher interest rate
Figure 35: Loan payment behavior, by household income, December 2015

Attitudes toward Borrowing

Most are uncomfortable with debt, but realize they need it
Figure 36: Attitudes toward borrowing, December 2015
Is debt ever appropriate?
Is debt really necessary?
The recession made most consumers manage their money more carefully
Millennials are in a quandary about credit cards
Figure 37: Attitudes toward borrowing, by generation, December 2015
Banks have a trust advantage among young people
Figure 38: Attitudes toward borrowing, by generation, December 2015
Banks have an opportunity with Hispanics
Figure 39: Attitudes toward borrowing, by Hispanic origin, December 2015

Attitudes toward P2P Lending

Millennials’ distrust of P2P lenders could open door for banks
Figure 40: Attitudes toward lenders, by generation, December 2015
High earners are also a challenge for P2P lenders
Figure 41: Attitudes toward lenders, by household income, December 2015
Parents are more trusting of banks
Figure 42: Attitudes toward lenders, by parental status, December 2015
How much do consumers know about P2P lenders?

Credit Scores

Most have solid credit scores
Figure 43: Credit scores, December 2016
Millennials most likely group to have low credit scores
Figure 44: Credit scores, by generation, December 2016
Lenders have to offer more to consumers with high credit scores
Figure 45: Most important features of lender, by credit score, December 2015

Appendix – Data Sources and Abbreviations

Data sources
Consumer survey data
Consumer qualitative research
Direct marketing creative
Abbreviations and terms
Abbreviations
Terms

List of Table

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