Personal Loans for Cash Flow Management

A series of events took place to set the stage for the disintermediation of retail banking – and for the continued growth in lending made possible by online platforms.

LendingClub Financial Health Officer Anuj Nayar said regulations have been updated, connectivity has improved and everyone has computing power on their desk or in their pocket.

As a result, personal loans are being accepted by defaulting consumers, yes, but also by individuals and families with healthy incomes.

Looking ahead, Nayar said demand for personal credit (currently used by 24% of the general population) is expected to increase. We may have saved money as a society during the pandemic, but economies are opening up again so the main driver of credit spending (that would be consumption) is moving back into positive territory. As people take on more debt, they’ll be more likely to take out personal loans to manage cash flow.

The conversation came to a background where the latest edition of the Paycheck-to-Paycheck Reality Check Report found that 32% of millennials and bridge millennials who live paycheck-to-paycheck use personal loans.

Continue reading: Living paycheck to paycheck sparks demand for personal loans

That’s a higher rate than other age groups, but Nayar said it’s “not surprising” that millennials are turning to these loans.

As he noted, this generation “has been gripped by the last two great recessions.” They graduated from high school shortly after the 2001 recession and then faced the Great Financial Crisis and the Great Recessions that followed during their early working years and into their peak earning years in their early 30s.

Buckled up for cash and in debt

They racked up a lot more debt along the way, Nayar said. College costs resulted in high student loans, and the average millennial has more than $27,000 in personal debt, excluding mortgage loans, credit card debt, installment loans, and more.

Hence, they resort to personal loans to help them achieve new milestones in their lives — when they get married, start families, or buy homes. Faced with the pressure of being the “sandwich generation” and caring for children while caring for elderly parents, millennials are finding help with personal loans.

This does not mean that only younger sections of the population are taking out loans. The same report found that 57% of personal loan users have no trouble meeting their financial obligations.

As Nayar noted, personal loans have become a “common financial tool to help manage debt and manage cash flow so they can do things like plan for the unexpected and build a savings cushion.”

Most Americans, he said, have less than $2,000 in savings, and a single event — a medical emergency, a car accident, or the need to send money to a family member — can erase that cushion.

So consumers take out these personal loans to get out of debt, such as B. credit card loans, and consolidate these liabilities to pay off or pay off. This frees up capital to build up the (quite useful) liquidity cushion.

“It can be useful not to have to remember all these different due dates to pay off all the different debts that you might have accumulated over the years,” Nayar said.

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