US Unsecured Loans Reach Record High as More Subprime Borrowers Take Loans

US unsecured loan balances have reached a record high, with 26.4 million consumers now holding these loans. This is a rise from 24.5 million last year.
By Newsroom | Finance, United States |

Record levels of unsecured loans in the United States are being fueled by a growing number of subprime borrowers. While this trend boosts interest income for lenders, it raises concerns about the financial stability of a segment of the population. The total amount borrowed through unsecured personal loans and credit cards has reached an all-time peak, with a notable increase in borrowers who have lower credit scores.

Growing Demand for Unsecured Credit

Americans are taking out more unsecured personal loans, with a larger portion of this growth coming from subprime borrowers. These loans, which do not require collateral, are increasingly used for various financial needs.

US unsecured loan balances hit record high on demand from subprime customers - 1

  • Increased Borrowing: The number of consumers carrying unsecured personal loans has risen significantly. As of the end of December, approximately 26.4 million consumers had these loans, up from 24.5 million a year prior. (Article 6)

  • Lender Benefits: Record loan balances increase interest income for lenders, provided borrowers continue to make payments. (Article 1)

  • Factors Driving Use: Lower interest rates may have prompted some households to switch from high-cost credit card debt to personal loans with fixed payments. Additionally, these loans are serving as a temporary solution for individuals facing sustained high living costs. (Article 1)

Subprime Borrowers Show Increased Activity

Data indicates a rise in borrowing activity among subprime consumers, a group historically facing challenges in accessing traditional credit.

  • Originating New Loans: Unsecured personal loan activity saw a surge in the second quarter of 2025, reaching new highs in both the amount of new loans issued and the total balances outstanding. (Article 2)

  • Fintech's Role: Fintech lenders have played a part by offering unsecured personal loan products, often using alternative data to assess creditworthiness and broaden access. (Article 5)

  • Serving Underserved Populations: Low- and moderate-income individuals, who have often been excluded from affordable, short-term loans from traditional banks, are finding options through fintech. (Article 5)

Credit Performance and Potential Risks

Despite the growth in borrowing, credit performance has remained broadly stable, though there are signs of growing pressure on certain borrower segments.

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  • Stable Delinquencies: Delinquency rates for unsecured personal loans remained relatively steady. In the second quarter of 2025, accounts 60 days or more past due were at 3.52%, a slight increase from 3.50% a year earlier. (Article 2)

  • Subprime Delinquency Improvement: Notably, subprime delinquency rates saw a decrease, falling to 11.4% from 11.9%, suggesting some strengthening within this riskier borrower group. (Article 2)

  • Emerging Strain: However, other reports point to increasing strain, with student loan debt showing the most severe deterioration among major lending sectors. A "K-shaped split" is appearing in consumer finances, with subprime borrowers falling behind. (Article 3)

  • Loss Risk Mitigation: Moody's has indicated that factors like job losses, falling interest rates, and accumulated wealth are expected to limit risks, keeping the quality of new unsecured loan deals largely steady. (Article 4)

  • Broader Debt Burdens: Fitch warns that wider adoption of "buy now, pay later" (BNPL) services could lead to weaker performance if consumers' overall debt becomes unmanageable. (Article 4)

Market Activity and Future Growth

The market for unsecured consumer loans is active, with securitization also reaching record levels.

  • Securitization Growth: The issuance of asset-backed securities backed by unsecured consumer loans reached record highs in 2025, driven by marketplace personal loans and BNPL originations. (Article 4)

  • Slower Growth Expected: TransUnion anticipates a slowdown in the growth of new credit extended this year, suggesting a return to more stable market conditions after pandemic-related fluctuations. (Article 6)

  • Rising Delinquencies: Delinquency rates have been gradually increasing over recent quarters. Lenders are responding by reducing initial credit limits to manage potential risks. (Article 6)

  • Economic Headwinds: Diminishing consumption growth, persistent affordability issues, and weaker job and wage growth are expected to impact the economic landscape. (Article 4)

Expert Insights

Analysts note the dual nature of the current unsecured loan market.

"Credit growth looks great until losses arrive." (Article 1)

Tom O'Neill, market pulse advisor at Equifax, observed a growing disparity:

"There’s a growing K-shaped split in the consumer landscape, with subprime borrowers falling behind." (Article 3)

Conclusion and Implications

The record high in US unsecured loan balances reflects a significant increase in borrowing, particularly among subprime consumers. While credit performance has largely held steady, and some subprime delinquency rates have improved, a widening gap in consumer financial health is apparent. Factors such as high living costs and shifts in interest rates have driven demand for these loans. Fintech lenders have expanded access, but concerns remain about the long-term impact of accumulating debt on vulnerable borrowers, especially given the backdrop of economic pressures like persistent inflation and potential slowdowns in job and wage growth.

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Frequently Asked Questions

Q: Why are US unsecured loan balances at a record high?
Unsecured loan balances in the US have reached a record high because more people, especially those with lower credit scores (subprime borrowers), are taking out these loans. This is partly due to high living costs and some people switching from credit cards to personal loans.
Q: How many Americans have unsecured personal loans?
As of the end of December, about 26.4 million Americans had unsecured personal loans. This is more than the 24.5 million who had them a year ago.
Q: Are subprime borrowers having more trouble paying back loans?
While subprime borrowers are borrowing more, their rates of missing payments have actually slightly decreased. However, there are signs that some people are finding it harder to manage their overall debt, and a gap is growing between those doing well financially and those who are falling behind.
Q: What are the risks of more people taking unsecured loans?
The main risk is that if people with lower credit scores cannot pay back their loans, they could face financial problems. This could also affect the stability of the economy if many people struggle with debt at the same time.
Q: What is happening with the market for these loans?
The market is very active, with record amounts of loans being sold to investors. However, experts expect the growth in new loans to slow down soon, and lenders are being careful by lowering the amount of credit they offer to new borrowers.