Personal Loans as Part of Your Budget?

Personal loan debt lags behind other types of debt, like car loans, credit cards, and mortgages, but Americans still owe more than $241 million in outstanding personal loan debt. That number has increased since the pandemic, when there was a dip in debt overall. We tend to think of all debt as “bad” but don’t really talk about how it can help you. And the fact that debt is actually morally neutral.

Plus, they’re becoming more popular; part of that could be their lower interest rates. The average personal loan rate is right around 11% to 12%, but you could get rates as low as 6% or 7%. Compare that to more than 20% APR for credit cards. This episode dives into personal loans and how they can be helpful for managing cash flow and how sometimes debt is a lifeline for some folks who need a leg up.

We cited information about debt, specifically student loans. Here’s where we got it:

• Lending Tree personal loan statistics

• Credit card trends before and after the pandemic (Government Accountability Office)

• Bankrate personal loan rates

• Bankrate credit card rates

• Reuters reports credit card debt topping $1 trillion

• Clever survey results: people using credit cards for necessities

• New York Fed household debt

Plus we also talked about rising prices and how a lot of those increases came from corporate price-gouging. You can read the report on Greedflation from Senator Bob Casey. Other coverage and reports on corporate profits and price increases:

• Business profit margins (not inflation) after COVID-19 (Federal Reserve)

• Economic Policy Institute

• Groundwork Collaborative

• News coverage from The Hill

Other information we cover includes layoffs and default rates. Here are some resources that demonstrate this:

• Yahoo! Finance news report on layoffs in 2023

• CNBC news coverage on the impact of 2023 layoffs

• St. Louis Fed data on rising consumer credit defaults

• Consumer Financial Protection Bureau data on rising mortgage defaults

Personal loans and financial concepts discussed in this episode

We have personal finance resources listed below that can better explain the concepts and terms we used in this episode:

• Secured vs. unsecured debt

• Miranda’s blog post on smoothing cash flow with personal loans

• Creating a personal financial statement (Sarah for Rocket Money)

• How to negotiate medical bills

• Pros and cons of debt consolidation (Miranda for Britannica Money)

• How to get student loan repayment help (Sarah for Juno)

• What to do if you can’t make car payments (CFPB)

• How to prioritize bills (Miranda for FinanceBuzz)

• Why payday loans are considered predatory (Sarah for Lantern)

• CFPB example of payday loan APR

• Payday loan vs. payday advance from Experian

Our recommended resources

We have a couple of recommended resources for this episode:

• CFPB loan resource on understanding different types of loans

• Calculator.net loan calculator to run the numbers

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• Sarah Li-Cain

• Miranda Marquit