- The New York Fed's Q4 2025 Household Debt and Credit Report found 4.8% of outstanding debt in some stage of delinquency, the worst reading since 2017.
- Subprime borrowers are expected to account for 40% of personal loan originations in 2026, up from 32.5% in Q3 2025, according to TransUnion.
- Personal loan originations hit a record 7.2 million in Q3 2025 for the second consecutive quarter, with $276 billion outstanding across 25.9 million borrowers.
- Fintech lenders now hold a 42% share of originations and have been most aggressive in approving near-prime and subprime borrowers at rates that can reach 27% to 31% APR.
- With the Fed holding rates steady at 3.5% to 3.75% and no cut expected before mid-year, the rate environment for personal loans is not improving soon.
The share of U.S. household debt in some stage of delinquency climbed to 4.8% in the fourth quarter of 2025, according to the New York Fed’s quarterly Household Debt and Credit Report released February 10. That’s the highest reading since 2017. Total household debt hit $18.8 trillion in Q4, up $191 billion from the prior quarter. Credit card balances rose $44 billion to $1.28 trillion. Transitions into serious delinquency, 90 or more days past due, ticked up for credit cards, mortgages, and student loans.
That delinquency picture lands at exactly the moment personal loan borrowing is accelerating fastest among the people least able to absorb a missed payment. A TransUnion report released in February projects that subprime borrowers will account for roughly 40% of personal loan originations in 2026, up from 32.5% in Q3 2025. These are borrowers with credit scores typically under 600. They’re not getting personal loans at 12% APR. They’re getting them at 24%, 27%, sometimes 30%.
The growth numbers are striking on their own. Unsecured personal loan originations hit a record 7.2 million in Q3 2025, the second consecutive quarter of new highs. Total outstanding balances reached $276 billion across 25.9 million borrowers. TransUnion projects originations will grow another 11.2% in 2026, more than double the projected growth rate for new mortgages and five times that of credit cards. Fintech lenders are driving a lot of that. They now hold a 42% share of originations, up from about one-third a year earlier.
The math problem hiding inside that growth story is simple. About 51% of personal loan borrowers say they’re using the money to consolidate credit card debt, per LendingTree. The logic holds if you’re trading a 20% credit card rate for a 12% personal loan. It stops holding when the personal loan comes in at 27%. Jim Triggs, CEO of nonprofit credit counselor Money Management International, put it plainly to CNBC: a borrower paying 28% on credit cards might get a personal loan at 24%, and that’s not much relief. For a subprime borrower, consolidation can actually cost more over the life of the loan once you factor in a longer repayment term.
The average personal loan rate as of mid-February was 12.15% for a borrower with a 700 FICO score on a three-year term, per Bankrate. That’s the average. Borrowers in the 660 to 689 credit score range are looking at closer to 27%. Those with scores under 600 are paying more. The Federal Reserve held its benchmark rate steady at 3.5% to 3.75% in January and isn’t expected to cut before June at the earliest. Personal loan rates have not moved much in response to the Fed’s recent cuts anyway. Bankrate senior analyst Ted Rossman noted that personal loan rates “really didn’t change that much” throughout 2025, finishing the year almost exactly where they started.
Rate shopping matters more right now than it has in years, because the spread between lenders is wide. Comparing the best personal loans from multiple lenders before committing can reveal differences of several percentage points on the same borrower profile, which on a $10,000 loan translates to hundreds or thousands of dollars over the life of the term. Credit unions are worth a close look. Federal credit unions cap personal loan APRs at 18%, which means a borrower who qualifies for membership has a built-in ceiling that no fintech lender can match.
One more thing to factor in: lenders are reading the same delinquency data the New York Fed just published. Some are already tightening underwriting. If your credit file is clean and your income is stable, you’re in a better negotiating position than the market averages suggest. If your credit is shaky, slowing down to check current personal loan rates across multiple lenders rather than accepting the first approval that comes in can be the difference between a loan that actually helps and one that makes things worse.
The New York Fed’s next quarterly report, covering January through March, will be the first read on whether the Q4 delinquency trend has leveled off or kept climbing. Given that subprime originations are still accelerating and wage garnishment on defaulted federal student loans resumed in early 2026, the conditions driving that deterioration have not changed.
