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Are personal loans an alternative to bankruptcy?

Personal loans are nothing new, but they are experiencing a surge in popularity among Ohio consumers. The growing popularity might be in part because, unlike other types of loans that must be used for specific purchases, personal loans have a wider range of applications. Debt management -- usually in an effort to avoid bankruptcy -- is just one such use.

In 2018, personal loans grew faster than any other type of consumer debt, totaling $291 billion. The average balance for this type of loan is around $15,143 with an average interest rate of 9.37 percent. This comes out to about $353 in monthly payments. If a person took out a personal loan for debt consolidation, that monthly payment might be considerably less than what they were paying on multiple debts and accounts before.

However, some consumer groups owe more than others. Generation Z owes the least, with the average balance coming out to $5,941. Millennials carry slightly higher balances, but still come in under the national average at $12,574. Baby boomers carry the greatest amount of personal loan debt, about $19,403 on average. While these numbers might seem high, only 10.8 percent of U.S. adults have personal loans, and they are often used for either consolidating debt or financing larger purchases.

Using personal loans for debt consolidation and management can be an effective strategy for some consumers in Ohio. However, this approach is not appropriate for everyone. For those who are struggling to repay their debts, personal bankruptcy could be the best possible option to secure a better financial future.

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