State-by-state analysis: Comparing personal loan debt across America
In quarter three of 2023, America’s personal loan finances totaled $241 billion, compared to $210 billion a year prior, making it a 14.8% change, TransUnion statistics showed.
Personal loan debt refers to the money borrowed by an individual from a financial institution, like a bank or a credit union, under a personal loan agreement.
They can be used for various purposes, including consolidating debt, financing a large purchase, covering emergency expenses or even funding a vacation or a wedding.
With so many options for taking out a loan, it’s no surprise that U.S. household debt has reached record heights yearly. In 2022, the end-of-year household debt was at $16.9 trillion, according to an article by Debt.org.
“Americans owe $986 billion on credit cards, surpassing the pre-pandemic high of $927 billion. We owe $11.92 trillion on mortgages, $1.55 trillion on vehicle loans and $1.60 trillion for student loans,” the article added. “With average consumer debt in America on the rise, it’s no surprise that debt delinquency — missed payments of 30 days or more — has increased for nearly all debt types.”
Personal loan debt rates vary by state
There are a number of factors that can contribute to states having different personal loan debt rates.
Some states have a higher cost of living and may see residents taking out larger personal loans to manage expenses, whereas, in states with a lower cost of living, the average loan size might be smaller.
Different states also have varying regulations regarding lending. These can include caps on interest rates, fees that can be charged and rules about loan amounts, per the National Consumer Law Center.
States with stronger economies might have residents with higher incomes and better credit, leading to larger loan amounts and possibly more favorable interest rates. Contrary to states with weaker economies or higher unemployment rates, where residents might rely more on personal loans but face higher interest rates due to perceived risk.
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Which states have the highest personal debt?
“Between Q3 2022 and Q3 2023, most states saw decreases in their residents’ average unsecured personal loan debts,” according to a report by WalletHub. “However, 18 states had increases, and some of those increases were quite dramatic.”
WalletHub did a state-by-state survey to determine which states suffered the highest amount of unsecured personal loan debt from 2022 to 2023.
States with the highest personal loan debt:
Montana — $12,817 (+31.17%).
Iowa — $11,142 (+15.72%).
Delaware — $9,619 (+7.97%).
Maine — $10,712 (+6.59%).
Idaho — $9,100 (+5.56%).
States with the lowest personal debt:
Alaska — $10,308 (-11.47%).
Vermont — $12,759 (-8.08%).
Wisconsin — $7,544 (-7.09%).
South Dakota — $9,663 (-6.96%).
Alabama — $5,780 (-5.89%).
Utah ranked 36th with a personal loan debt rate of $8,964 in the third quarter of 2023, down 2.27% from quarter three of 2022.
“In a time of continued higher-than-average inflation, one would think the average personal loan size would be increasing in most states,” WalletHub editor John Kiernan said. “However, the opposite is true — only 18 states had increases, which suggests that either people are handling the current economic conditions well, or they are turning to other sources of borrowing like credit cards and buy now pay later offers. Given Americans’ ever-growing mountain of credit card debt, the latter seems to be true.”
How to manage personal loan debt
Handling personal loan debt requires a strategic and disciplined approach.
According to Bankrate, “As with any other form of debt, there are advantages and disadvantages to be aware of before applying for a personal loan. "
“If you don’t consider these factors before accepting the loan terms, you could put your financial health on the line. Carefully evaluate the following pros and cons and how they could impact your wallet to make the best decision for your situation,” Bankrate added.
To effectively manage and pay off personal loan debt, Experian recommended the following strategies:
Compare rates from various lenders.
Look out for any additional charges.
Plan your finances prior to taking out a loan.
Determine the overall expense of the loan.
Ensure payments are made punctually.
Understand the appropriate uses for personal loans.
