Bank loans in the United States - statistics & facts
Buying a home, getting into college, or purchasing a car, there are many reasons to take out a personal loan. Additionally, businesses may get loans to buy equipment or cover unexpected expenses. All that has made the lending sector in the United States nearly double in size since 2006, with the value of gross loans and leases from FDIC-insured commercial banks alone reaching approximately 12 trillion U.S. dollars in 2023. An increase in the value of loans granted is generally a positive sign for the economy, as long as the outstanding debt remains sustainable and under control. Whenever individuals, companies, or other organizations take out a loan, they use that money to increase their spending or to invest it in their business, which results in economic growth.
On the other hand, low interest rates may incentivize borrowing and high rates may make it less attractive. Banks may also be less keen on lending money to risky clients in times of economic uncertainty. These factors may help explain the fluctuations in the lending market, but even during times of high interest rates there are companies and individuals taking out new loans, particularly if they have good credit rating and can afford the higher borrowing costs.
What type of loan has the largest market share?
Commercial real estate loans, which differ from mortgages in that they are secured on commercial property and not on housing, were the type of loan provided by commercial banks with the biggest market share as of May 2024. Meanwhile, the value of commercial and industrial loans, in other words, lending provided to companies and other organizations, amounted to 2.77 trillion U.S. dollars. Apart from mortgages, the value of outstanding consumer loans or other lending products provided to households, including credit card debt or revolving credit, was significantly lower. In addition to the fluctuations of those types of loans, the lending industry is changing, as the value of loans provided by digital banks is expected to increase sharply during the coming years, which will disrupt the market.Why are interest rates high?
The prime interest rates charged by U.S. banks soared in 2022 and 2023, reaching their highest point since 2000. Since then, they have stayed at high levels. In fact, prime rates are the interest rates that banks charge to their least risky clients. While the average customer will need to borrow at a significantly higher cost. But why has the cost of borrowing money increased? High inflation levels and rising Federal Reserve interest rates were some of the primary variables that contributed to the overall increase in interest rates. The demand for lending is another element that may impact interest rates.On the other hand, low interest rates may incentivize borrowing and high rates may make it less attractive. Banks may also be less keen on lending money to risky clients in times of economic uncertainty. These factors may help explain the fluctuations in the lending market, but even during times of high interest rates there are companies and individuals taking out new loans, particularly if they have good credit rating and can afford the higher borrowing costs.
