States Adding the Most Personal Loan Debt

Americans have hundreds of billions of dollars in personal loan debt, though the amount pales in comparison to other types of debt like credit cards and mortgages. That said, personal loans are very useful because they offer long-term borrowing with fixed monthly payments, and the funds can be used for nearly anything.

Between Q3 2022 and Q3 2023, most states saw decreases in their residents’ average unsecured personal loan debts. However, 18 states had increases, and some of those increases were quite dramatic. In order to highlight these changes from state to state, WalletHub analyzed its latest proprietary data on consumer debt.

“In a time of continued higher-than-average inflation, one would think the average personal loan size would be increasing in most states. 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.”

John Kiernan, WalletHub Editor

Main Findings

States Adding the Most Unsecured Personal Loan Debt

Note: *1 = Most Unsecured Personal Loans Debt Increase.
 

In-Depth Look at the States Adding the Most Personal Loan Debt

Montana

Montana residents added the most personal loan debt between Q3 2022 and Q3 2023, with the average loan amount in the state increasing by a whopping 31%, reaching $12,817. For further context, 32 states actually had decreases, so Montana’s extremely high increase is especially unusual.

The good news is that Montana doesn’t have a lot of people in financial distress (people who have been allowed to skip loan payments due to financial difficulty), so it seems like people are able to handle their increased debt load for the time being.

Iowa

Iowa residents increased their average personal loan amount by 16% between Q3 2022 and Q3 2023. The average personal loan amount in Q3 2023 was $11,142, which puts it pretty close to the middle of all the states.

It’s worth noting that Iowa residents have one of the lowest average credit card debts in the country, and are increasing that debt at a low rate. It seems that people in the state may find personal loans to be more suitable for their borrowing needs at the moment.

Delaware

The average personal loan amount in Delaware increased by 7.97% between Q3 2022 and Q3 2023, which represents the third-largest increase during the time period. However, it’s worth noting that even after this sharp uptick, Delaware residents are still in the bottom half of the country when it comes to the average personal loan balance, at $9,619.

Although people in Delaware are increasing their personal loan balances at a fast rate, they don’t have the same trend when it comes to credit card debt or household debt as a whole, where they rank toward the middle of the nation.

Tips for Paying Off Personal Loan Debt

• Budget wisely: Making a strict monthly budget, and cutting out unnecessary expenses, will help you ensure that you set aside enough money every month to cover your loan payments. If possible, you may even want to consider paying more than you’re required to each month, which will help you get out of debt sooner and pay less interest.
• Set up automatic payments: Missing a loan payment is bad for your credit score, but setting up automatic payments prevents that from happening, assuming you have enough money in your bank account to cover the payment.
• Prioritize high-interest debts: If you have multiple unsecured personal loans or debts, prioritize paying off those with the highest interest rates first. This strategy minimizes the overall interest you'll pay, helping you save money in the long run. Make minimum payments on other debts while directing any extra funds toward the high-interest ones.
• Explore debt consolidation options: You may want to consider using a debt consolidation loan or balance transfer credit card to combine multiple loans into a single balance with a lower interest rate. Doing this can simplify your payments and reduce overall interest costs. However, you’ll likely need to have at least good credit to qualify for the best options.
• Generate additional income: Explore opportunities to increase your income. This could involve taking on a part-time job, freelancing, or selling items you no longer need. Supplementing your income provides extra funds that can be dedicated to paying off your unsecured personal loans more quickly.
• Consider other debt solutions: If you’re really having trouble paying off your loans, you could consider asking your lender for temporary forbearance or a reduced interest rate. In more drastic situations, you could consider setting up a debt management plan or settling your debt if you’ve been delinquent on it for a while.

Methodology

To determine the states adding the most unsecured personal loan debt, we analyzed WalletHub’s proprietary data on consumer debt.

 
Sources: Data used to create this ranking were collected as of January 3, 2024 from WalletHub database.

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