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

Robust demand from subprime customers spurred growth in U.S. unsecured loans last ‌year with their ⁠combined ⁠balances surging 10% to a new high of $276 billion, according to TransUnion's Credit Industry Insights Report.

Some 26.4 million consumers carried those loans as of end-December, up from 24.5 million a year earlier.

"As interest rates began to fall, many consumers are consolidating their credit card balances into unsecured loans," said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.


Lower-income ⁠consumers are ‌also using these loans as a stopgap measure to deal with higher costs of living that have not been followed by ⁠similar raises in wages, she added.

Credit card issuers have increased lending to lower-income consumers, with total balances rising 4% last year to $1.15 trillion. But they have reduced initial credit limits to deal with the risk, the report said. Delinquency rates have been slowly rising over recent quarters.

SLOWER GROWTH

TransUnion forecasts slower growth this year for the volume of new credit extended.

Raneri said the credit markets are ‌now going back to more 'normal' growth levels, after strong fluctuations since the pandemic.

On Thursday, the credit bureau revised its previous forecast of a 5.7% rise ⁠in new unsecured loans in 2026 to 11.2%. TransUnion projects a 4% rise in mortgages and 4.2% climb in home refinancings.

"People that have recent mortgages taken with higher interest rates are starting to have access to refinancing and we expect that demand to grow," TransUnion's vice president added.

Auto loans are expected to shrink 1.5% this year, after having risen around 5% last year with consumers accelerating purchases to avoid the impact of import tariffs.