Highlights:

Personal loans are a growing sub-asset class of consumer credit that offer investors access to a growing $253 billion market.
Short-duration asset classes, like personal loans, typically offer favorable returns, without the same risk as longer-dated consumer assets, like mortgages.
The resilience of the unsecured personal loan market makes it an attractive asset class for banks and credit unions looking to diversify their portfolio mix.

The unsecured personal loan market continues to hit record highs, and despite challenging macroeconomic conditions, shows few signs of slowing down. According to a May 2025 TransUnion industry report, the personal loan market hasn’t just rebounded, it’s expanding. New loan originations, new account balances, and total loan balances are all up — quarter after quarter, year over year.

As banks and credit unions seek new ways to diversify their portfolio mix, personal loans as an asset class offer a unique opportunity to invest in shorter-duration loans with high-yields.

Let’s take a closer look at what investors need to know about what’s driving sustainable growth in the unsecured personal loan market and benefits this expanding asset class offers institutional investors.

What is the unsecured personal loan market?

As of Q1 2025, unsecured personal loans represent a $253 billion market with a total of 29.8 million loans. Currently 24.6 million Americans have an unsecured personal loan and carry an average of $11.6K in debt per borrower.

6 trends personal loan market trends for investors to watch

As the personal loan market continues to expand, here’s closer look at six key trends investors should keep an eye on:

Total balances are hitting record highs
In Q1 2025, total balances climbed to $253B, but the average individual consumer’s loan balance dropped to $11.6K, about a 2% decrease compared to the prior year.

Why this matters for investors: A rise in total balances shows strong growth in the personal loan market overall likely indicates continued resilience despite turbulent economic times.

New loan originations are climbing.
In Q4 2024, new originations increased for the fourth consecutive quarter, hitting a record 6.3 million — an increase of 26% year-over-year.

Why this matters for investors: Growth in new originations may signal strong demand and a healthy market, creating more investment opportunities, better diversification, and scalable volume for recurring purchases or securitizations.

New account balances are increasing.
Total new account balances grew 17.3% year over year to $33.9 billion in the last quarter of 2024.

Why this matters for investors: Rising new account balances might suggest greater borrower capacity and demand, supporting higher loan economics and stronger yield potential.

Loan term lengths are falling.
The average loan term length in Q4 2024 fell 9.8% from the prior year to just below 28 months.

Why this matters for investors: Unlike longer-dated assets, like mortgages, short-duration loans can potentially offer attractive returns in just a few years.

Estimated median APRs are increasing.
Interest rates continued their upward trajectory for prime and near prime risk tiers in Q4 2024. Rates rose to an average median APR of 21.8%, a 12.4% increase from 2023.

Why this matters for investors: Higher APRs can improve gross yields, potentially leading to stronger returns. This is especially true when credit performance remains stable.

Delinquency rates are dropping.
The overall borrower-level delinquency rate fell to 3.49% in Q1 2025, down from 3.75% in Q1 2024 and up slightly from 3.25% in Q1 2023. Many credit segments are now performing on par with, or better than, 2023 vintages, reflecting stable repayment behavior.

Why this matters for investors: Consistently improving delinquency trends suggests that credit conditions are holding steady, which may offer investors greater confidence in cash flow reliability and portfolio resilience.

Key factors promoting growth unsecured personal loans

The TransUnion market analysis points to several factors driving the lower delinquency rates in the personal loan market, and in turn, sustained growth for personal loans across all risk tiers:

More competition for new originations: Direct mail volume has remained relatively steady since 2023; however online loan inquiry volumes were up ~42% in March 2025 over the prior year. In Q4 2024, fintechs accounted for just over 48% of total new account balances and 34% of new loan originations, accounting for an 8% market share increase over the prior year.

Higher loan demand in the lower risk credit tiers. Super prime (FICO 781+) borrowers increased market share by ~2% and below prime risk tiers (FICO 660 and below) also saw significant growth in new loan originations. Total balances for the super prime risk tier saw the most increases, with modest growth in prime plus (FICO 721-780).

New advances in lender risk management practices. Despite reduced delinquency rates and less risky borrower classes, lenders still appear to be maintaining cautious exposure. In Q4 2024, average loan originations were just over $6k, and loan terms were shorter for all risk tiers year-over-year — with super prime seeing the biggest decline of 13% year-over-year.

How investors can manage rate risk with personal loans

With two Fed cuts still expected later this year, many investors are reassessing interest rate exposure. Personal loans may help manage rate risk by introducing shorter-duration assets into portfolios typically anchored to longer-term, fixed-rate instruments.

If rates decline, refinancing activity could support continued growth in personal loan originations. This asset class may also offer diversification benefits and differentiated performance characteristics, though results depend on credit quality and market conditions.

The takeaway

During these times of economic uncertainty, capitalizing on the personal loan market may be a win for both borrowers and investors. Once seen as a last resort for consumers in financial distress, unsecured personal loans are now a go-to option for low-risk borrowers looking to refinance high interest debt. With new originations and balances hitting historic highs, and delinquency rates on a downward trajectory, investing in unsecured loans as an asset class could have a big payoff for investors.

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