Different generations borrow for very different reasons: LendingPoint Data Lab report
Since LendingPoint opened its doors for business four years ago, weâ€™ve seen interest in our personal loans skyrocket. This trend extends beyond just our four walls: more and more Americans — from Generation Y to Boomers and beyond — are turning to personal loans to give them the financial boost they need to achieve their goals.
So, as the first study from our newly-launched LendingPoint Data Lab, we took a deep dive into the loans weâ€™ve originated to unearth the generational trends in how people tell us theyâ€™re using those loans. LendingPoint has a massive volume of data, and every few weeks our Data Lab team will mine that data to provide new insights into Americansâ€™ borrowing behavior.
Other than credit card refinancing, debt consolidation or â€œother,â€ the Data Lab found that home improvement is the most-cited rationale (35%) for taking out a loan, followed by a major expense or purchase (18%) and then medical costs (12%). But those trends donâ€™t necessarily stand up when we focus on specific age groups.Â
The table at the end of this post summarizes what we uncovered. Here are some of the big age-related takeaways (for the loans that borrowers tell us are being used for reasons other than credit-card refinancing, debt consolidation, or â€œother,â€ which together represent the vast majority of stated use of funds).
Younger generations focus on matrimony and moving when borrowing
- Gen Y and millennials (18 to 34 year olds) are twice as likely as borrowers in general to earmark their loans for weddings. Within this study, about 16% of borrowers 18 to 24 and 15% of those 25 to 34 say theyâ€™ll use loans to help pay for their walks down the aisle, compared to 7% of borrowers of all ages.
- The younger cohort is also as much as twice as likely to take out loans to pay for moving. About 22% of 18 to 24 year olds in this study, and 14% of those 25 to 35, use their loans to decamp to a new locale, compared to 10% of all borrowers.
- The top reason young people, ages 18 to 34, take out loans in this study: major purchases. That can be a new refrigerator, upgraded computer equipment, or any big-ticket item that costs more than the funds someone has readily available.
Older generations use personal loans to fundÂ home improvement, medical services and vacations
- For GenXers and older (age 35+) in this study, home improvement becomes the top reason people give for taking out a personal loan, and that reason becomes more common as the age of the borrower goes up. Thirty-four percent of people 35 to 44 use their funds to spruce up their digs, and 42% of those 65 and older do so. Just 22% of those 25 to 34 say the same.
- By age 35, the medical expenses categoryÂ becomes a top three reason in this study for borrowing. About 14% of those 65 and older say thatâ€™s the reason, the highest of any age group. Comparatively, just 6% of those 18 to 24 and about 10% of those 25 to 34 say thatâ€™s the reason they need funds.
- The older borrowers get, the more wanderlust apparently takes hold. The percent of borrowers who use loans for vacations climbs with each age group, peaking with those 65 and older. About 7% of that age cohort in this study uses their loans to fund their travels.Â
â€œLooking at the reasons people take out loans gives us a fascinating glimpse into how a personâ€™s age drives financial priorities,â€ said Mark Lorimer, LendingPointâ€™s Chief Marketing Officer. â€œYounger Americans are starting off their adult lives focused more on marriage and relocating than their older counterparts. As Americans age, and they become homeowners, their financial priorities shift to maintaining and upgrading their homes. And clearly, medical expenses become more pressing the older people get.â€Â
Details from the study
|Use of Funds||Age 18-24||Age 25-34||Age 35-44||Age 45-54||Age 55-64||Age 65+|
About LendingPoint Data Lab:Â
The LendingPoint Data Lab analyzes data, from both LendingPointâ€™s own business and from third party sources, to unearth trends and insights into Americansâ€™ borrowing behavior.Â
For this study, the LendingPoint Data Lab calculated the total number of loans LendingPoint originated in 2015, 2016 and 2017 by the age of borrowers at the time of their submitted loan applications. It then calculated the percent of loans originated by each of the fifteen use cases LendingPoint allows applicants to select on its online application.Â
The Data Lab excluded all loans for which the borrower indicated using the loan for credit card refinancing, debt consolidation, or â€œother,â€ and calculated percents for each age group, and overall, based on the total remaining loans.Â
*Excludes credit card refinancing, debt consolidation and â€œotherâ€.
LendingPoint is a personal loan provider specializing in NearPrime consumers. Typically, NearPrime consumersÂ are people with credit scores in the 600s. If this is you, weâ€™d love to talk to you about how we might be able to help you meet your financial goals. We offerÂ loans from $2,000 to $25,000 with terms from 24 to 48 months, all with fixed payments and simple interest.