ACA Association of Credit and Collection Pro : CREDITORS: Strong Personal Lending Market Expected for 2016

Personal loan balances will continue to increase while delinquency rates will remain stable this year, according to TransUnion's new personal loan forecast released Wednesday.

'The strong performance of personal loans is expected as the popularity for these products continues to rise among prime consumers,' according to a news release from TransUnion.

The increases are expected in secured loans - that have some sort of collateral backing the loan - and cash unsecured loans that are repaid in one to five years, according to TransUnion.

Overall, since the third quarter of 2013, the number of consumers with personal loans has increased 18 percent from 23.07 million to 27.34 million as of the third quarter last year, which is the latest data available.

Consumers had total balances of $82.52 billion in unsecured loans and $165.46 billion in secured loans, according to the news release.

'During and immediately following the Great Recession, consumer demand for both secured and unsecured personal loans grew,' said Jason Laky, senior vice president and consumer lending business leader at TransUnion in the news release.

Unsecured loan balances are expected to continue to grow this year, but at a slower rate than in the past. 'From year-end 2014 to year-end 2015, the average unsecured loan balance is expected to have grown 7.1 percent from $6,757 to $7,235,' TransUnion reports.

The forecast is that the unsecured balance growth will slow to 5 percent, according to the news release.

Still, since the fourth quarter of 2012, the average balances for unsecured loans have increased every quarter. The balances increased more than $1,300 from the end of 2012, when the average unsecured loan balance was $5,908, according to TransUnion.

'In the past two years, consumer adoption of unsecured loans has increased,' Laky said. 'As more consumers with prime or better credit scores use unsecured loans to finance their purchases, average balances have grown each quarter. Our data also indicate that consumers across all risk tiers are accessing and using these loans while also limiting defaults.'

Even as balance growth continues, TransUnion reports the delinquency rate for unsecured personal loans (borrowers that are 60 or more days past due on their payments) is expected to remain at 3.54 percent through the end of this year.

Those delinquency rates are still well below the levels during the recession, which peaked at 4.81 percent in the fourth quarter of 2009.

Secured Loan Balances and Delinquencies

The average secured consumer loan balances are also expected to increase this year, according to TransUnion.

They peaked in third quarter of 2009 at $19,209 and then dropped steadily until the third quarter of 2014. The balances bounced back and have grown each quarter since then, starting at $16,752 in the fourth quarter of 2014 and reaching $17,411 in the fourth quarter last year.

The predicted average secured loan balance for the end of this year is $17,904, according to TransUnion.

'When the economy is stronger and consumers have more disposable income, consumers are more likely to purchase larger items, such as boats or motorcycles, using secured loans,' Laky said.

Delinquency rates for secured loans are expected to increase slightly from 3.66 percent at the end of last year to 3.72 percent by the end of 2016, but that is still within the range of delinquency recorded for the last five years, TransUnion reports.

'The low unemployment rates of recent years, coupled with continued low delinquencies, indicate secured loans will continue to be an important financial product for consumers in the coming year,' Laky said.

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