American consumers are loading up on personal loans.
The term “personal loan” covers an array of products. Typically, though, it’s an installment loan with a fixed interest rate and monthly payments that might stretch for one year or several. Current rates range from roughly 6% to 36% or more.
You can get a personal loan from a big-name bank, online lender or credit union. Americans use them to fix roofs, buy hot tubs, finance vacations and pay tuition. And they’re getting more popular every year.
The share of consumers with personal loans rose from 31% in 2017 to 38% in 2025, according to a February report from Experian, the credit reporting agency. The average loan carried a $19,333 balance in 2025.
Why are personal loans surging? One reason, lending experts say, is that Americans are coping with relentless inflation, struggling to afford everything from home repairs to summer travel.
“The short answer is that life’s getting more expensive, and people are looking for new ways to finance it,” said Matt Schulz, chief consumer finance analyst at LendingTree.
Also, getting a personal loan has never been easier.
“Personal loans are more available, I think, than they’ve ever been, and they’re more reputable,” said Stephen Kates, financial analyst at Bankrate.
The personal loan industry has “a bad rap,” Kates said, because of a historic association with check-cashing stores and payday loans. “And I think their reputation is improving through better transparency, better regulation and oversight,” Kates said.
7 Reasons Americans Get Personal Loans
Here are the top reasons American consumers said they might take a personal loan, according to Experian’s January survey:
- Major purchase, 42%
- Emergency expenses, 35%
- Debt consolidation, 33%
- Home improvement, 33%
- Vacation, 21%
- Medical expenses, 20%
- Education, 17%
The big drawback with personal loans is the interest rate. The average rate on personal loans is 12%, as of April 8, according to Bankrate.
That makes personal loans generally cheaper than credit cards, which charge an average rate of 19.6%, Bankrate says. But you’ll typically find lower rates on either a home equity loan (around 8%) or a home equity line of credit (about 7%).
For borrowers with lower credit scores, however, personal loans can carry interest rates well past 30%.
“You have to know what you’re getting into,” Schulz said. “You have to have a plan to pay it off. And you have to know what you can afford.”
4 Reasons to Consider a Personal Loan
With those cautions in mind, here are four situations where a personal loan could make sense:
To Cover an Emergency Expense
Kate Wood, a lending expert at NerdWallet, got her first personal loan to fix a leaky roof. “I needed the money quickly,” she said.
She could have taken out a home equity loan — but home equity loans typically involve a daunting amount of paperwork and significant time: two to six weeks, Bankrate estimates. By contrast, you can often get a personal loan in less than a week, according to NerdWallet.
To Pay Off Your Credit Cards
Personal loans are popular for debt consolidation. The math can be especially attractive with credit card debt. A consumer with balances on two or three cards paying interest rates of 20% or higher might be able to move all that debt to a personal loan with a lower rate.
The lower rate will save you money over time. One payment is easier than two or three. And there’s the added assurance of an installment loan, with predictable payments and a balance that keeps shrinking.
“A lot of people are beginning to see personal loans as a way to deal with debt consolidation,” Wood said. But the success of that approach “very much depends on you changing your behavior.”
Remember, though, that a personal loan might not be your best deal. A zero-APR balance transfer card — if you can qualify — lets you pay no interest for 12, 18 or even 24 months. “Obviously, a zero-percent balance transfer card is the best option,” Schulz said, “because you can’t beat zero percent.”
For a Home Improvement Project
For a single home project, lending experts say a personal loan could be a better fit than a home equity loan, which typically entails weeks of paperwork and involves large sums. Your contractor may even offer to finance the project directly — and that, too, is a personal loan.
When It’s Your Only Credit Option
For Americans with weaker credit, a personal loan may be the only accessible option. To get a home equity loan, you typically need a credit score of at least 680 — and, of course, you need a home.
If you have weak credit, a personal loan can be a lifeline, albeit an expensive one. For borrowers with credit scores in the low 600s or below, the average interest rate hovers around 30%, according to LendingTree.
“There are going to be circumstances where people say, ‘I have an emergency, and I don’t have any money, and I need to pay this medical bill, or I need my brakes fixed,'” Kates said. “These products provide a service. They exist for a reason.”
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