Table of Contents
Executive Summary
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- The issues
- Rising interest rates
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- Figure 1: Effective federal funds rate, Jan. 1, 2007-Jan. 1, 2016
- Millennials are wary of credit
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- Figure 2: Attitudes toward debt, by generation, December 2015
- The opportunities
- Interest rate is key in choice of lender
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- Figure 3: Reason for choosing lender, December 2015
- P2P lending has only just begun
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- Figure 4: Have P2P debt, by generation, December 2015
- Partnering with P2P lenders can benefit banks
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- Figure 5: Attitudes toward borrowing, December 2015
- What it means
The Market – What You Need to Know
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- Total debt is trending up
- Consumers are paying down credit card balances
- Student loan balances continue to grow
- Rising interest rates make borrowing less attractive
- Income is down
Market Size
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- Total debt is trending up
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- Figure 6: Total US consumer debt, Q3 2010-Q3 2015
Market Breakdown
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- Consumers are paying down credit card balances
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- Figure 7: Credit card data*, Q3 2010-Q3 2015
- Credit card delinquency rates are down
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- Figure 8: Credit card delinquency rates, Q3 2010-Q3 2015
- Student loan balances continue to grow
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- Figure 9: Student loan balances, Q3 2010-Q3 2015
Market Factors
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- Rising interest rates make borrowing less attractive
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- Figure 10: Effected federal funds rate, Jan. 1, 2001-Jan. 1, 2016
- Income is down
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- Figure 11: Median US income, 2005-14
- Increase in college expenses
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- Figure 12: Average tuition and fees, selected years 1975-76 through 2015-16
Key Players – What You Need to Know
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- P2P lending is growing and disrupting the marketplace
- Big financial institutions are gearing up to fight
- Millennials don’t like debt
- Institutions are taking over P2P loans
- Point-of-sale loans
- Alternative lending models
What’s Working?
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- P2P lending is growing and disrupting the marketplace
- Lending Club
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- Figure 13: Lending Club online ads, 2015, 2016
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- Figure 14: Lending Club direct mail ad, 2015
- SoFi
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- Figure 15: SoFi email ad, January 2016
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- Figure 16: SoFi mobile ads, 2016
What’s Struggling?
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- Big financial institutions are gearing up to fight
- Millennials don’t like debt
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- Figure 17: Attitude toward debt, by generation, December 2015
What’s Next?
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- Institutions are taking over P2P loans
- Point-of-sale loans
- Alternative lending models
- Goldman Sachs is building its own platform
The Consumer – What You Need to Know
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- Credit card debt is most popular type of unsecured debt
- Millennials’ lending activities
- They have the most installment debt, a little less credit card debt
- Millennials research and apply online
- Millennials are in a quandary about credit cards
- Millennials’ and high earners are challenges for P2P lenders
- Interest rate is the most important factor
- Existing relationships are most important to older consumers
- Relatively few consumers have less debt now than a year ago
- Many borrowers make more than the minimum monthly payment
- Most are uncomfortable with debt, but realize they need it
- Most have solid credit scores
Who Has Unsecured Debt?
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- Credit card debt is most popular type of unsecured debt
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- Figure 18: Type of unsecured debt carried, December 2015
- Young women have more student loans
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- Figure 19: Have student loans, by gender and age, December 2015
- Millennials have the most installment debt, a little less credit card debt
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- Figure 20: Type of unsecured debt carried, by generation, December 2015
- Parents are more likely to have unsecured debt than non-parents
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- Figure 21: Type of unsecured debt carried, by parental status, December 2015
- Payday loans are more popular among high earners
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- Figure 22: Consumers with payday loans, by household incomes, December 2015
Purpose of Unsecured Loans
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- Most get a bank or credit card loan to buy a car
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- Figure 23: Purpose of unsecured loan, by type of loan, December 2015
- Low-income earners and parents use bank loans for bills
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- Figure 24: Purpose of unsecured loans, by household income and parental status, December 2015
Important Factors in Choosing a Lender
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- Interest rate is the most important factor
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- Figure 25: Most important factors in choosing lender, December 2015
- And interest rates matter most to Gen X and Baby Boomers
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- Figure 26: Most important factors in choosing lender, by generation, December 2015
- Existing relationships are most important to older consumers
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- Figure 27: Most important factors in choosing a lender, by generation, December 2015
- Hispanics are concerned about cash flow and credit score
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- Figure 28: Most important factors in choosing lender, December 2015
Online Loan Activities
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- Millennials research and apply online
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- Figure 29: Online loan activities, by generation, December 2015
- Parents are more likely to go online
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- Figure 30: Online loan activities, by parental status, December 2015
Loan Management
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- Men and Whites have less debt now than a year ago
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- Figure 31: Loan payment behavior, by gender and race, December 2015
- Many borrowers make more than the minimum monthly payment
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- Figure 32: Loan payment behavior, by generation, December 2015
- Hispanics are more likely to make only minimum payments
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- Figure 33: Loan payment behavior, by Hispanic origin, December 2015
- Women focus on paying down loan with higher interest rate
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- Figure 34: Loan payment behavior, by gender, December 2015
- Higher earners focus more on loan with higher interest rate
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- Figure 35: Loan payment behavior, by household income, December 2015
Attitudes toward Borrowing
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- Most are uncomfortable with debt, but realize they need it
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- Figure 36: Attitudes toward borrowing, December 2015
- Is debt ever appropriate?
- Is debt really necessary?
- The recession made most consumers manage their money more carefully
- Millennials are in a quandary about credit cards
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- Figure 37: Attitudes toward borrowing, by generation, December 2015
- Banks have a trust advantage among young people
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- Figure 38: Attitudes toward borrowing, by generation, December 2015
- Banks have an opportunity with Hispanics
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- Figure 39: Attitudes toward borrowing, by Hispanic origin, December 2015
Attitudes toward P2P Lending
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- Millennials’ distrust of P2P lenders could open door for banks
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- Figure 40: Attitudes toward lenders, by generation, December 2015
- High earners are also a challenge for P2P lenders
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- Figure 41: Attitudes toward lenders, by household income, December 2015
- Parents are more trusting of banks
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- Figure 42: Attitudes toward lenders, by parental status, December 2015
- How much do consumers know about P2P lenders?
Credit Scores
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- Most have solid credit scores
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- Figure 43: Credit scores, December 2016
- Millennials most likely group to have low credit scores
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- Figure 44: Credit scores, by generation, December 2016
- Lenders have to offer more to consumers with high credit scores
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- Figure 45: Most important features of lender, by credit score, December 2015
Appendix – Data Sources and Abbreviations
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- Data sources
- Consumer survey data
- Consumer qualitative research
- Direct marketing creative
- Abbreviations and terms
- Abbreviations
- Terms
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