A major medical expense was chosen as the most likely reason for using a personal loan
According to a recent 2017 survey by Discover Personal Loans, 68 percent of those who have taken out a personal loan said it helped them accomplish their financial goals. Additionally, 70 percent of people said that taking out a personal loan made them feel financially responsible.
When asked, the two most important benefits of a personal loan were lower interest rates and quick distribution of funds. Twenty-two percent selected lower interest rates compared to other borrowing options and 21 percent said the quick turnaround of funds. Other benefits included no collateral required, fixed interest rates and fixed monthly payments.
Ways to Use a Personal Loan
More than one-third, 38 percent, of people surveyed have taken out a personal loan in the past. Out of all respondents, 26 percent cited a major medical expense as the most popular potential use for a personal loan, followed by 22 percent saying debt consolidation, and 13 percent using it to fund a small business.
“Personal loans can be used in a number of different ways to help people save money and reach their financial goals. For example, more than half the people surveyed have less than $ 5,000 in savings to cover unexpected or emergency expenses,” said Dan Matysik, vice president of Discover Personal Loans. “A personal loan can be a smart financial tool to cover those costs.”
Interest Rates Are Top-of-Mind
People consider several factors when deciding on a personal loan. According to the survey, 43 percent of respondents said learning their interest rate would be most helpful before applying for a personal loan, followed by 16 percent saying repayment terms and 15 percent interested in knowing the monthly repayment amount.
Among those who have already taken out a personal loan in the past, knowing the interest rate was the most important factor when they picked their personal loan lender, which was consistent across all age groups.
Outside of interest rate, the responses varied by age. Respondents between the ages of 23 and 29 selected fees (19 percent) or the loan amount (18 percent), as their most important factor when they picked a personal loan lender.
Comparatively, these items were not as important among respondents who are 65 and older, with only 12 percent considering fees or the loan amount to be the most important factor.
“The bottom line is when choosing a personal loan, all borrowers should consider the cost of credit, which includes both interest rates and fees. Discover Personal Loans offers competitive loans – with fixed interest rates and no origination fees – and useful resources like the Check Your Rate tool, which lets potential borrowers find out their interest rate before applying. This allows them to better understand the total estimated cost of the loan,” said Matysik.
Borrowers Ultimately Want Trust
The trustworthiness of a lender is also an important consideration. Outside of the interest rate, according to those who have taken out a personal loan in the past, 18 percent selected trustworthiness as the most important factor when choosing a lender.
“Trust in your lender is key when shopping for a personal loan. The first step to building that trust is education and there are multiple, credible sources where borrowers can gather information,” said Jeff Rose, founder of Good Financial Cents and partner of Discover Personal Loans. “You can get information from financial blogs or the lenders themselves. For example, Discover Personal Loans offers a variety of online, educational resources and they provide customer service seven days a week to answer questions and help guide customers through the loan process.”
About the Survey
The national survey of 2,000 adults was commissioned by Discover Personal Loans and conducted by Rasmussen Reports, an independent survey research firm (http://www.rasmussenreports.com), June 28-30, 2017. The margin of sampling error was+/- 2 percentage points with a 95% level of confidence.
Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America’s cash rewards pioneer, and offers private student loans, personal loans, home equity loans, checking and savings accounts and certificates of deposit through its direct banking business. It operates the Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation’s leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discover.com/company.