If you’re in the market for a new ride but haven’t been saving up, you may want to pump the brakes.
Kyle Littleton, 26, wanted to get rid of nearly $4,500 in credit card debt.
The amount weighed on him; he was always tempted to keep using the card; and he was annoyed the monthly payments didn’t get reported to any of the three credit bureaus, which would help burnish his credit history.
But instead of increasing his monthly payments to pay down the debt, Littleton, a HR specialist from Washington, D.C., took out a personal loan in August to wipe out the outstanding balance all at once.
“I paid it back and now I can’t add any more to it,” he said. “That’s the good thing about a loan over a credit card,” he said. “Otherwise, you think ‘what’s another $40’ and soon that turns into another $70 and so on.”
Littleton is part of a larger borrowing trend. Personal loans have become the fastest growing consumer debt, and those borrowers are getting younger, according to a new study from LendingPoint, an online lender that gave USA TODAY a first look at its data.
The share of personal loan borrowers between 18 and 35 has doubled since 2015. They now make up almost a quarter of all debtors, up from 12 percent in 2015, according to the online lender.
“It seems like we’re attracting a higher percentage of younger borrowers than Boomer ones,” said Mark Lorimer, chief marketing officer at LendingPoint. “It’s consistent with what we’ve seen in other areas. Millennials are more credit card adverse than their parents.”
A study last year from the credit bureau TransUnion found millennials carried fewer credit cards than Gen X did at the same age. Their balances were lower, too. The changes also come as many online lenders have proliferated, making it easy to get a personal loan without walking into a bank.
Like Littleton, debt and credit card consolidation are the top reasons for getting a personal loan among younger adults. But they also more likely than Gen X and Boomer borrowers to use the funds for a major purchase, moving expenses and a wedding, according to LendingPoint’s data.
Older borrowers are more inclined than their younger counterparts to use loans for home improvements, medical bills and vacations.
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Littleton’s personal loan has a two-year term, but he’s paying even more than the set payment each month. He’s also happy that his timely payments are reported to all three major credit bureaus – Experian, Equifax and TransUnion – which will help boost his credit score.
“Realistically, my biggest long-term goal is buying a house,” he said. “Having better credit will help me with that.”
From groceries to student loans, parents are dipping into their personal savings to support their children financially, even after college.
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