As an entrepreneurship consultant, I often get asked about financing options from small business owners and startups. Personal loans can provide accessible capital to fund a new venture when traditional bank loans are harder to qualify for. But taking on significant debt also weighs on household balance sheets.
Globally, personal loan growth is outpacing many other credit products. This guide explores the latest international industry trends and statistics that both main street and wall street should know.
Accelerating Global Demand Over the Past Decade
- Personal loans in China expanded over 15% annually from 2014-2019 (Wang, 2022)
- India saw personal loan originations double from ₹ 5 trillion in 2018 to over ₹ 10 trillion by 2022 (CRIF, 2022)
- US balances owed shot up 63% from $167 billion in 2021 to $222 billion in 2024 (LendingTree, 2023)
Rising demand stems from lower barriers to access online and less stringent qualification requirements than mortgages or auto loans. Approval decision can take just minutes through digital lenders.
But ease of securing funds contributes to potential over-borrowing down the line. As consultants, we must ensure clients evaluate actual business needs before taking on new debt.
Surging Reliance Across Age Groups
Here in the US, generational trends reveal almost all age groups depend more on personal loans over the past five years:
- Gen Z loan balances doubled from $3,051 in 2018 to $6,658 in 2021 (Forbes Advisor, 2022)
- Millennials owe over 3X more than five years ago, rising from $4,406 to $13,418 (Forbes Advisor, 2022)
- Even Baby Boomers hold 25% higher balances at $20,370 compared to $16,247 in 2018 (Forbes Advisor, 2022)
Younger generations were already struggling under student loan debts before taking on more credit. As consultants, we must gauge clients‘ total debt picture and ability to balance new financing.
Risks to Household Balance Sheets
Despite the flexibility personal loans offer, increased reliance compounds risks:
- 60+ day delinquencies edged up from 3.00% in 2021 to 4.14% in 2024 (LendingTree, 2023)
- Average interest rates topped 11% in early 2023 – limiting borrowing power (Forbes Advisor, 2023)
- 85% used loans for debt consolidation or everyday expenses (Bankrate, 2021)
Tapping expensive credit to fund living costs is rarely sustainable long term. Yet for startups and small ventures, personal loans can provide critical early-stage capital when utilized strategically.
As advisors, we must strike the right balance for clients – funding growth without overextending household budgets. Careful planning and setting limits now helps mitigate risks down the road.
Conclusion: Find the Right Balance of Risk vs. Reward
For startups and entrepreneurs, personal loans offer accessible financing to turn ideas into reality. But founders must weigh the benefits against long term risks to their personal finances.
By benchmarking client lending levels to broader economic trends, consultants can guide appropriate, responsible borrowing. The most successful ventures blend external capital with realistic growth projections tied to household budget realities.
With the right advisor, personal loans remain a valuable funding component for many small businesses in the startup and growth phase. Yet economic uncertainty impacting consumers also trickles down to main street. Proactive planning is key to ride out any coming volatility.
