A quarter of loans taken out during the pandemic went to home improvement
Since the start of the COVID-19 pandemic in March 2020, 24% of Americans have taken out personal loans. Payday advance loans, also called payday loans, are short-term loans that are easy to get from https://oakparkfinancial.com/. Now, a survey suggests that the most common use of the borrowed money during this time was for home improvement projects, closely followed by paying medical bills. This seems to signal a change in the use of personal loans.
A survey conducted by Ipsos-Forbes in March 2021 asked 1,000 people how they spent their loans. Home improvement projects (25%) and medical bills (21%) were the top two trends, followed closely by debt consolidation (20%), vehicle financing (20%) and auto repair (20%).
Unsurprisingly, allocating funds to home improvement projects was the main craze of families with children. More than 70% of Americans have undertaken some sort of home improvement during the pandemic simply because of the foreclosure and the increase in time spent at home.
On the other hand, many part-time workers who have been hit hard by the pandemic have used their loans to pay off their medical bills and auto loans for the purchase of a new vehicle. Even though the COVID relief programs put in place in March and December – totaling $ 1,800 per adult – have been helpful, months of unemployment have pushed people to seek additional sources of funding.
Surprisingly, the number of personal loans taken out and applied for was lower than the researchers had expected. In the survey, 76% of people have not requested or taken out a personal loan, mainly due to the tightening of qualification requirements by lenders. The average credit score of applicants in 2020 was 643; however, people with credit scores ranging from 600 to 659 have experienced a sharp drop in approvals. Overall, there was a 6% drop in personal loan growth, and the average loan size also declined.
There was a further increase in non-revolving debt in 2020, up 3.9%, indicating that people are still relying on various forms of personal loans as a reliable form of financing. However, while there were 3.1 million new personal accounts in 2020, this figure is still lower than in 2019. In contrast, revolving debt in 2020 has decreased by more than 10%, indicating that people are paying off their credit card debt.
“While personal loans continue to be a great option for many clients, clients have other options,” Discover’s vice president of personal loans, Matt Lattman, commented on how fewer people depend. only personal loans. However, long-term data indicates that personal loans are here to stay, although spending trends may have changed.