As fintech companies make it easier to obtain a loan, millennials are definitely the target for many originators. And it’s working — millennials are definitely partaking in the online lending bonanza.
Compared to the previous generations, millennials are more likely to take out a personal loan to cover everyday costs, relying less heavily on credit cards as their predecessors, according to data from LendingPoint. For this study, LendingPoint analyzed the loan applications of individuals to whom the company extended personal loans in 2017 and 2018 (a total of 65,626 loans).
Fintech fueling personal loans
It has become easier than ever for consumers to take out a personal loan. Fintech firms have removed a lot of the friction in the loan process, decreasing the time to acquire new customers, and increasing the likelihood of a consumer receiving a loan.
Fintech firms originated 36 percent of all personal loans last year, compared to less than 1 percent in 2010. Firms like LendingClub, Prosper, and SoFi are driving the expansion of personal loans. Many upstart personal lenders are hitting record origination levels.
Millennials don’t like credit cards
Unlike their parents, millennials tend to shy away from credit card usage in favor of alternative methods of financing. Millennials have fewer credit cards and carry lower balances than the previous generation. This generation carries on average two fewer bankcards and private label cards than Gen X consumers at the same respective ages.
Millennials seek more personal loans
Millennials may not like to use credit cards, but that doesn’t mean they are averse to using credit. In fact, they prefer to use short term loans to pay for things like weddings and moving costs. Through October 2018, LendingPoint extended loans to more than twice as many millennials than it did in all of 2017.
More loans, sure, but they’re smaller, too
While they may be seeking more loans, millennials are taking out smaller loans. LendingPoint data showed average loan requests are down 8 percent across the board for all ages. This coincides with a significant, almost two-times increase of the number of loans extended year-over-year.
According to LendingPoint data, the firm’s average millennial borrower asked for a loan of nearly $12,000. This year, that request dropped down to just under $10,300, a decrease of about 14 percent (by comparison, GenX borrowers — age 38 to 53 — reduced their average loan request only about 6 percent, from about $12,700 to a little less than $12,000, in that same period).