Last week, J.D. Power released the results of its 2022 US Consumer Loan Survey. The survey found that 38% of consumers are vulnerable – defined as consumers experiencing hardship. in paying essentials, such as bills – have turned to personal loans to manage their debt.
Additionally, 47% of consumers said an ad influenced them to get a personal loan, and 61% said they would use their lender again. According to JD Power, the top three reasons consumers use personal loans are: debt consolidation, lower interest rates, and lower monthly payments.
Research Based on the responses of 5,269 individual borrowers and conducted between January and March 2022. It focuses on four key components: the application process, loan management, procurement and loan conditions. . The top three lenders in terms of customer satisfaction are Marcus of Goldmen Sachs, followed by US Bank and American Express.
Research results on consumer satisfaction for JD Power’s 2022 loan.
If consumers are struggling with credit card debt, personal loans offer an opportunity to consolidate debt and get better terms. Personal loans have lower interest rates than credit cards, so they can help consumers save money on interest when they pay off the loan.
“If someone has a lot of credit card debt, a personal loan makes sense. It might not be the best rate out there, but…if you’re paying 30%, 35% [annual percentage rate] on a credit card and you can get it down to 15%, it’s still not the best but it gets better,” said Craig Martin, CEO and Global Director of Wealth and Lending Intelligence at JD Power, say ZDNet.
Many lenders stopped lending at the start of the pandemic. But as consumers are facing greater financial strain and some of the unknowns that lenders faced at the start of the pandemic have been cleared up, lenders are offering more loans. .
“[Lenders’] fear of what will happen in terms of access to credit [at the start of the pandemic] – there are many unknowns. So they stopped lending altogether, and I think obviously a lot of the negative scenarios didn’t play out… Now we have a whole new set of unknowns coming, but I think that’s it. a more manageable environment,” Martin said.
JD Power found that competitive rates, easy access, and more options led to an increase in personal loans. Another reason why personal loans are growing is because younger generations are less interested in credit cards.
“Consumers, especially younger consumers, have begun to shy away from some other off-market debt products, like credit cards, which are often designed as a double-edged sword. They can be very expensive. useful and gives you access to everything. It’s like a line of credit, but there’s a lot of negatives that come with it. And I think a fixed personal loan could be simpler,” Martin said. .
There are a number of factors that consumers should think about when considering a financial product of any kind. For example, interest rates. The Federal Reserve voted to raise the federal funds rate in early May as a way to fight inflation. And as inflation remains above the 2% target, further increases are likely.
With the cost of living on the rise, many are left wondering if personal loans are a viable option to make a living. As long as consumers are using financial products responsibly, they are still a good tool to use, says Martin.
“As interest rates rise, it will actually make personal loans more attractive. Think of what the focus of a personal loan is; according to our respondents, it is to consolidate debt and pay off everything. So if inflation goes up, people are looking for ways to make better financial decisions. People with financial challenges – it will be a necessary product, “he said.
An important aspect of any financial product is having the financial knowledge to make the best use of it. It is becoming increasingly important for lenders and financial institutions to aid their clients’ financial literacy. JD Power has found in other studies that when customers feel better supported by their lender, they experience greater satisfaction and higher loyalty.
Also: Direct banking or digital banking leads in customer satisfaction: JD Power study
“We’ve noticed a lot of these companies are training in finance – [concepts like] “how do you budget, how good are you options, how do you earn credit” – so they can lower the interest rate they’re getting in the future, says Martin speak.
“I think about this as organizations move from being product-focused to being consumer-focused. It’s not just about how [the product] meet the customer’s needs, but how it addresses long-term systemic problems the customer may have to help them get in a better position is also important. “
Another key finding of the study is the role of advertising in consumers’ decisions to apply for a loan. According to the survey, 47% of consumers said that an ad made them consider applying.
If what consumers expect when applying for a loan matches the information they have been given about the financial product, they are likely to experience higher levels of satisfaction. According to JD Power, a major part of the satisfaction a customer experiences lies in managing consumer expectations, communications from the company, and the ease and speed of the sign-up process.
“A lot of the important things to a good experience happen after you get their attention,” says Martin. “It’s about finding the right balance between what the customer thinks they’re going to get and then what they’re actually getting.”
Once a company captures the attention of consumers, it is important that they live up to their promises. Is it an easy approval process? Has the business informed the terms of the loan well? Once consumers are approved, is it easy for them to get help if they have problems or questions?
“It’s largely communication. When we talk about customer experience, expectations match the experience. So if I expect a lot and get very little, I’m really not satisfied and vice versa. “, said Martin.
