Personal Loans Industry - United States: Current Over-served and Under-Served Market Segments
The current over-served market segments in the personal loans industry in the United States, specifically focused online, are the people who need debt consolidation, those who need credit card refinance, and those who have home improvement projects. On the other hand, the current under-served market are the small business owners, people buying a home, and people who are looking for green financing.
Market Growth of Personal Loan Industry
- Digital-first financial technology businesses drive the continued growth of the personal loan industry.
- Financial technology companies made up 38% of personal loans in the United States in 2018. These fintech companies help to boost the market size of the personal loan industry to $138 billion.
- There are three primary categories for consumer loans: retail, debt consolidation, and home improvement financing.
- The flexibility of personal loans is another driving force behind the growth of the industry. With a personal loan, a borrower can use it for almost anything they want.
- People in the United States treat personal loans as "quick cash" that they can utilize to pay many things, including credit card debt and vacations.
Over-Served Market Segments in the Personal Loans Industry
- Americans use debt consolidation to pay off multiple debts. With debt consolidation, several debts are paid at once in the form of a single, larger debt but with more favorable payoff terms such as a lower monthly payments and interest rates, etc.
- Around 39.2% of personal loan borrowers in the United States use their loans to pay off general debt consolidation.
- Considering the information above, Americans that need debt consolidation serve as one of the market segments in the personal loan industry that is currently over-served.
CREDIT CARD REFINANCE
- Credit card refinancing is typically referred to as a balance transfer. Americans utilize personal loans to transfer funds to their credit card, giving them a specific amount of time to fully pay off their credit cards.
- About 21.8% of personal loan borrowers in the United States use their loans for credit card refinancing.
- Taking this information into account, Americans that need credit card refinance are a current market segment that the personal loan industry is over-serving.
- Home improvement involves the replacement, renovation, addition or alteration, remodeling, modernization, repairment, or conversion of any building or a section of said building. It could also be an improvement to a section of land that is adjacent to a building.
- Since home improvements tend to be expensive, Americans turn to forms of debt to help financially support their home improvement projects.
- About 7.7% of personal loan borrowers in the United States use their loans for home improvement projects.
- Based on this information, Americans that have home improvement projects and are seeking loans to help finance it is an over-served market segment of the personal loan industry.
Under-Served Market Segments in the Personal Loans IndustryINDUSTRY
- Business owners often turn to personal loans if they fail to qualify for business loans.
- Just 1.0% of personal loan borrowers in the United States use their loans to finance their business.
- Considering this information, Americans that are small business owners are an under-served market segment in the personal loan industry.
- A personal loan is best used when buying a mobile home or a small residence.
- Merely 0.7% of personal loan borrowers in the United States use their loans for homebuying.
- Based on this information, Americans seeking a loan to buy a house are a market segment that is currently under-served in the personal loan industry.
- A green loan is offered to loan borrowers when they are administering energy-efficient measures within their residence.
- At least 0.3% of personal loan borrowers in the United States use their loans as green loan.
- Considering this information, people that plan to transform their houses into environmentally sustainable homes are an under-served market segments in the personal loan industry.
For this project, we initially focused on searching for a direct answer. However, after expanding our research to global scope and not focusing on online delivery, we were unable to locate specific data. We did find relevant industry statistics from industry reports on the personal loans sector in the United States.
Based on the industry statistics, we were able to determine the top reasons people seek personal loans and corroborated this information across multiple sources. Considering the meaning of market segments, we were able to provide a list of both under-served and over-served market segments in the personal loans industry based on the reasons on the borrowers use personal loans.