Debt consolidation is the most popular reason for getting a personal loan, according to the 2023 Investopedia personal loan consumer survey. ✃Home improvements and large purchases were the following two most common reasons cited for seeking a loan.

Loan costs, including interest rate and origination fees, were borrowers’ chief considerations when taking out a personal loan, according to the survey. Whe🌞n researching loans and lenders, respondents said they💮 turned to lender websites first, many going with a lender they already had a relationship with.

Investopedia surveyed 962 existing and potential personal loan borrowers between Aug. 14 and Sept. 15, 2023, to better underst🐎and how they research, shop for, and use personal loans.

Debt Cꦗonsolidation Remains the Top Reason Why Borrowers 🐓Seek Personal Loans

We asked current and potential borrowers to choose from a list of purposes for a personal loan tඣhey already had or one they were seeking. 

Debt consolidation was the number one reaso🦩n why 48% of current borrowers got a personal loan and why 29% of potential borrowers were seeking a personal loan. “The lender had a better interest rate than all of my credit cards, so I ended up just consolidating everything under a personal loan,” said one survey respondent who took out a personal loan for debt consolidation.

Among those with a current personal loan, 17% said they got it to pay for a home improvement. “Within nine months of moving in, the roof was leaking. So we took out the loan to replace the roof because we didn't have enough equity in the house yet,” said one survey respondent who took out a loan🌺 for home improvemen💛t. Among potential loan borrowers we surveyed, 26% said they’d get a loan for home improvements.

Covering the cost of a large purchase was cited by 16% of current borrowers a🧔nd 19% of p🌟otential borrowers.

Loan Cost Is the Top Consideration When🐻 Shopping for a Loan

W꧃hen we asked respondents to rank loan features on a scale from most important to least important, almost half of borrowers (48%) ranked the cost of the loan as the most important factor when choosing a personal loan. By comparison, in a similar survey conducted by Investopedia in 2022, 39% of borrowers ranked 🔯loan cost as the most important.

Just over a third of borrowers (37%) ranked loan characteristics (such as loan amount and repayment term)ꦗ as the most important factor—another 14% of responses listed borrowing requirements (such as credit score) first. A mere 2% ranked additional features like reporting to all three credit bureaus as the most important.

Borrowers More Sensitive to Interest🍰♒ Rate Than Any Other Cost

For the survey, loan costs include the interest rate, origination fees, any prepayment penalties, and late fees. Among these, 78% of borrower responses ranked APR as the most important factor, followed by origination fee and 澳洲幸运5开奖号码历史查询:prepayment fee, both at 10%. Late payment fe൩es were ranked first by just 3% of responses.

In a similar study conducted by Investopedia in 2022, borrowers also ranked APR as the most important cost factor, at 51%. At the same time, the average interest rate on a two-year unsecured loan over the past year has risen to 12.49%, according to the Federal Reserve. The difference between last year’s survey respons🌊es and this year’s may suggest that as interest rates have climbed, so has borrower sensitivity to overall loan cost, especially interest rates.

Borrowers Appl𒐪y for Loans Based on Lender𝓰 Websites, Prior Relationship With Lender

When asked to select the top factors that determined where they appliꦜed for a loan, the lender’s website was cited in 48% 𒆙of current borrower responses.

Survey respondents could choose up to six factors. Ha𒅌ving an existing business relationship was cited in 40% of responses, and third-party reviews (such as by Investopedia) were cited in 26% of responses. Borrowers were also swayed by recommenꦑdations from friends, family, and acquaintances (14%) and by national or local advertising (7%).

Maximum APR Borrowers Said They Would Ac𝄹cept on the Low End of Actual Rates

Most borrowers in the survey said the maximum interest rate🙈 the๊y would accept for a loan fell between 7.99% and 18.00%.

That range aligns with the lowest advertised APRs among the 70 personal loan lenders in the database Investopedia maintains to evaluate personal loans and lenders, but it may not reflect what borrowers ultimately accept in the marketplace. Data collected separately by Investopedia at the same time this survey was conducted shows that peﷺrsonal loan interest rates on funded loans average🔯d around 21.00% at that time.

Methodology

Investopedia conducted a survey of 962 U.S. adults aged 20 to 75 who💞 are currently borrowing or plan to borrow a personal loan from 70 different lenders. Respondents opted-in to an online, self-administered questionnaire from a market research vendor. Data collection took place 🎉between Aug. 14, 2023, and Sept. 13, 2023, with semi-structured interviews conducted with 17 respondents from Aug. 30, 2023, to Sept. 15, 2023. Multiple quality checks, including screeners, attention gauges, comprehension evaluations, and logic metrics, among others, were used to ensure only the highest quality responses were included.

To learn how we rate and review personal loans, see our complete 澳洲幸运5开奖号码历史查询:Personal 🌄Loan Revieꦏw and Ranking Methodology.

Correction—Nov. 1, 2023: This st𝓰ory was corrected to note that our evaluation process involved 70 lenderไs.