Demand from subprime customers fuelled a significant expansion in the U.S. unsecured loan market last year. Combined balances surged by 10% to reach a new high of $276 billion, according to TransUnion’s Credit Industry Insights Report. The report indicates that approximately 26.4 million consumers held these loans as of the end of December, an increase from 24.5 million the previous year. TransUnion is a global information and insights company that provides credit information and risk management solutions. They help businesses and consumers make informed decisions.
Michele Raneri, Vice President and Head of U.S. Research and Consulting at TransUnion, noted that falling interest rates have encouraged consumers to consolidate credit card balances into unsecured loans. Additionally, lower-income consumers are increasingly using these loans to manage higher living costs amid stagnant wage growth. Credit card issuers have expanded lending to this demographic, with total balances increasing by 4% last year to $1.15 trillion. However, initial credit limits have been reduced to mitigate risk, and delinquency rates have been gradually rising.
TransUnion forecasts a slowdown in the volume of new credit extended this year, with Raneri stating that credit markets are returning to more ‘normal’ growth levels following pandemic-related fluctuations. The credit bureau has revised its previous forecast for new unsecured loans in 2026, now projecting an 11.2% increase, up from the initial 5.7%. The company also projects a 4% rise in mortgages and a 4.2% increase in home refinancings.
Raneri added that consumers with recent mortgages at higher interest rates are beginning to access refinancing options, with demand expected to grow. Conversely, auto loans are anticipated to contract by 1.5% this year, following a 5% increase last year driven by consumers accelerating purchases to avoid the impact of import tariffs.
