Subprime borrowers fuel surge in personal loans, TransUnion finds

Many Americans are borrowing and incurring debt to keep up with rising costs for basic necessities, such as groceries, rent and utilities, as well as to make larger purchases. Credit card balances reached a record $1.28 trillion at the end of 2025, according to the New York Fed. 

As consumers look to manage that debt, personal loans will be the primary driver of new borrowing this year, according to a forecast released Thursday from TransUnion, one of the three major credit reporting agencies.

“Personal loans have truly become the middle-class refinancing option for high-interest credit card debt. That’s why they’re growing exponentially,” said Jim Triggs, CEO of Money Management International, a nonprofit credit counseling organization. 

TransUnion forecasts that unsecured personal loan originations will drive consumer credit growth in 2026, increasing 5.7% compared with last year — outpacing year-over-year growth in the number of new mortgages through purchases (4.2%) and refinancing (4%), as well as credit card originations (2%). Meanwhile, the firm forecasts that auto loan originations will decline slightly this year, down 1.5%.

It’s the continuation of a trend that started last year, said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. Unsecured personal loan originations reached a record 7.2 million in the third quarter of 2025, the second consecutive quarter of new highs, according to the TransUnion report.

“When people have a lot of credit, particularly on credit cards, their interest rates will be higher than what a personal loan usually is. And so a lot of people start to look at being able to consolidate their credit cards,” Raneri said.

Obtaining an unsecured personal loan is based on your creditworthiness and doesn’t require any collateral, like a car or savings account, to back the loan. As a result, borrowers can often get funding faster than with loans that require collateral. 

Fintech lenders, such as LendingClub and SoFi, have also made it easy for borrowers to get loans quickly, experts say. TransUnion found fintech lenders held a 42% share of personal loan originations in the third quarter of 2025, up from about one-third a year earlier. 

With inflation and high interest rates, a further widening of the so-called K-shaped economic split between higher-income and middle- and lower-income consumers is also adding momentum to personal loan growth, experts say. 

Higher-income…