Quick Answer: Personal loan originations hit a record 7.2 million in Q3 2025 and are projected to grow another 11.2% in 2026 — the fastest-growing credit product in the country. The main driver: Americans with credit card debt at a record $1.28 trillion are using personal loans to escape 20%+ credit card interest. A personal loan can make mathematical sense if you qualify for a rate meaningfully lower than your cards. But subprime originations are up 32.5% year-over-year, meaning many people are borrowing at rates that don’t actually help.
“Personal loans have truly become the middle-class refinancing option for high-interest credit card debt.” — Jim Triggs, CEO, Money Management International (Source: CNBC, Feb. 20, 2026)
When credit card debt hit a record $1.28 trillion at the end of 2025, something had to give. For millions of Americans, that something was turning to personal loans — not because they’re getting richer, but because they’re trying to escape credit card interest rates that average around 20%.
According to a February 2026 TransUnion report, unsecured personal loan originations hit a record for the second consecutive quarter in Q3 2025. Total outstanding balances reached $276 billion. Originations growth for 2026 is projected at 11.2% — more than double the projected growth rate for new mortgages (4.2%) and five times that of credit card originations (2%). I answer this specific question in depth in Should I Use a Debt Consolidation Loan to Pay Off My Credit Cards?.
Who’s Actually Taking Out These Loans
The headline number — 25.9 million borrowers, up 7% year-over-year — sounds like demand. But the breakdown reveals stress. Subprime originations (borrowers with lower credit scores who qualify for the highest rates) grew 32.5% year-over-year in Q3 2025. Near-prime grew 21.5%. Even super-prime grew 21.5%. Every credit tier is borrowing more, but lower-credit borrowers are borrowing the most, the fastest. (Source: TransUnion Q4 2025 Report)
And FinTech lenders — the ones with the fastest approvals and loosest underwriting — now hold a 42% share of originations, up from about 33% a year earlier. The easiest lenders are growing fastest.
What People Are Actually Doing With These Loans
According to LendingTree’s personal loan statistics, more than half of borrowers (51%) are using personal loans for debt management:
- 40.1% — Consolidating multiple debts into one payment
- 10.9% — Specifically paying off credit cards
- 9.5% — Covering everyday bills and living expenses
- 6.9% — Home improvements
That 9.5% covering everyday expenses is the number I keep coming back to. When someone takes out a personal loan to pay for groceries or rent, they’re not solving a debt problem — they’re layering new debt on top of an income-expense gap. That gap is the real problem. The debt is just the symptom.
The Math: When Does a Personal Loan Actually Help?
A personal loan makes mathematical sense in one scenario: when the loan rate is meaningfully lower than the rate you’re paying on the debt it replaces. That’s it. The “middle-class refinancing option” framing only holds up if the rate is actually lower. Here’s what the numbers look like:
The Rate Math: If you have $10,000 in credit card debt at 20% APR and qualify for a personal loan at 15%, you save about $500 per year in interest — and have a fixed payoff date instead of an open-ended minimum payment trap. If you qualify for a loan at 25%, you just made things worse.
According to LendingTree data, average personal loan rates by credit score range:
When It Works (Lower Rate Than Cards)
- Excellent credit (720+): ~15.46% APR — likely beats your credit card rate
- Good credit (680–719): ~23.27% APR — may beat high-rate cards
- Fixed payments + end date: Structural advantage over revolving minimums
- Single payment: Simplifies management of multiple cards
When It Doesn’t Help
- Fair credit (660–679): ~27% APR — probably doesn’t beat your cards
- Poor credit (below 560): ~31.24% APR — actively makes things worse
- FinTech subprime loans: Fastest approval, highest rates — check before signing
- Still spending on cards: New loan + same card habit = more debt, not less
The trap no one mentions: A personal loan consolidates your cards — but if you don’t cut up or freeze those cards afterward, you’ll have a personal loan balance AND new credit card balances within six months. This is the most common way debt consolidation fails. It didn’t fail because of the loan. It failed because the spending pattern that created the debt didn’t change.
Why So Many People Are Borrowing Right Now
Context matters. Bankrate’s 2026 Financial Outlook Survey found 32% of Americans expect their personal finances to worsen this year — the highest level of pessimism since 2018. Among those pessimists, 78% cite continued high inflation. Credit card balances grew by $44 billion in Q4 2025 alone, according to the Federal Reserve Bank of New York’s Household Debt and Credit Report.
People aren’t taking out personal loans because they’re thriving. They’re taking them out because existing debts are growing faster than their income, and a personal loan feels like a lever they can pull. Sometimes it is. Sometimes it just adds a new monthly payment to an already strained budget.
My take: Debt is math, not morality. If the math on a personal loan genuinely improves your situation — lower rate, fixed payoff date, single payment — it’s worth considering. But run the actual numbers first. Don’t take a loan because approval was fast and the lender’s website said it was a good idea. The 32.5% jump in subprime originations tells you lenders are very willing to approve loans that don’t help borrowers. That approval isn’t a green light; it’s just an offer.
Questions to Answer Before You Apply
- What rate will I actually qualify for? Use a soft-pull prequalification tool (most major lenders offer these without affecting your credit score) before committing. Don’t assume you’ll get the advertised rate.
- Is that rate lower than my credit card rate? If not, stop. A personal loan that charges more than your existing debt isn’t consolidation — it’s addition.
- Will I close or freeze my cards? If the answer is no — if you’re going to keep using the cards after paying them off with the loan — the loan will likely make your debt situation worse over time, not better.
- What’s the total cost of the loan? Run the full amortization, not just the monthly payment. A 3-year loan at 18% on $10,000 costs you about $2,900 in interest. Know that number before you sign.
- Is debt the problem or is it the symptom? If you’re taking a loan to cover groceries, the loan doesn’t solve your problem — it delays it and adds interest. The income-expense gap needs addressing first.
Not sure which path makes sense for your situation? The free Find Your Path quiz walks through your specific numbers and identifies which debt relief options — including whether a personal loan consolidation actually helps in your case — are worth pursuing.
Key Takeaways
- Personal loan originations hit a record in Q3 2025; $276 billion is now outstanding across 25.9 million borrowers
- Growth is projected at 11.2% in 2026 — far faster than mortgages or credit cards
- 51% of borrowers are using loans to consolidate or pay off debt — the most common use case
- Subprime originations are up 32.5% YoY, meaning many borrowers are paying 27–31% APR — likely worse than their credit cards
- The math works only if the personal loan rate is meaningfully lower than your existing debt rate
- Consolidation fails when cardholders keep spending on the same cards afterward — address that first
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Frequently Asked Questions
Is using a personal loan to pay off credit card debt a good idea?
It depends entirely on the rate you qualify for. If you have excellent credit (720+), you may qualify for rates around 15% — meaningfully lower than a typical credit card at 20%. In that case, the math works: lower interest, fixed payments, defined end date. If your credit is fair or poor, personal loan rates can reach 27–31%, which is likely higher than your credit card rate. The 32.5% jump in subprime personal loan originations in 2025 suggests many people are taking loans that actually cost them more, not less. Always prequalify (soft pull, no credit impact) and compare the actual rate to your card rate before applying.
Why are so many people taking out personal loans right now?
Credit card debt reached a record $1.28 trillion at the end of 2025, with average credit card interest rates around 20%. Personal loan originations hit a record 7.2 million in Q3 2025, with 51% of borrowers using them for debt consolidation or credit card payoff. Separately, 32% of Americans expect their personal finances to worsen in 2026, with most citing continued inflation. People are using personal loans as a pressure valve — to lower their interest cost on existing debt and create a fixed payoff timeline. Whether it actually helps depends on the rate they get.
What happens if I take out a personal loan and keep using my credit cards?
Your debt increases. This is the most common way personal loan consolidation fails. The loan pays off the cards, but if you don’t freeze or close the cards, you’ll likely accumulate new card balances while also making personal loan payments. Within months, you have both. Consolidation only helps if it’s the last step in a behavioral change — not a bridge to more spending. Before you apply for a consolidation loan, decide what you’re going to do with the cards it pays off.
What is a realistic personal loan interest rate for someone with average credit?
According to LendingTree data, someone with good credit (680–719) can expect around 23.27% APR. Fair credit (660–679) runs about 27%. If the average credit card charges around 20%, these rates may not save you money. The benchmark rate where personal loans clearly beat cards — around 15% — requires a credit score of roughly 720 or above. The 11.2% projected growth in personal loan originations for 2026 means lenders will be aggressively marketing to all credit tiers. Approval isn’t the same as beneficial.
Is a personal loan ever the right answer for covering everyday expenses?
Not usually. About 9.5% of personal loan borrowers use them to cover everyday bills, according to LendingTree. Taking out a loan to pay for groceries or rent means borrowing at 15–31% interest to cover costs that recur monthly — a pattern that compounds quickly. A personal loan to cover a one-time emergency has different math than a loan to cover a persistent gap between income and expenses. If expenses consistently exceed income, the loan adds debt to an already unsustainable equation. That’s an income or spending problem, and those require different solutions.
Sources: CNBC — Personal Loans Surge Amid Affordability Struggles (Feb. 20, 2026) | TransUnion Q4 2025 Originations Report | LendingTree Personal Loan Statistics | Federal Reserve Bank of New York — Household Debt and Credit Report
Dealing With Debt? Understanding your options is the first step. See how all your debt relief options compare — including ones most sites won’t tell you about. The Find Your Path quiz gives a recommendation based on your actual numbers, and the Scam-O-Meter checks any company’s complaint history before you sign. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.
