As the industry continues to rake in billions, personal loan alerts have declined

Investors’ appetite for personal loans is unabated even as warnings mount over deteriorating credit approval and risk assessment practices, as well as growing borrower distress pockets.

Trouble at First Brands Group last September became a flashpoint for critics of private credit after the heavily leveraged auto parts maker ran into trouble, showing how aggressive debt structures were quietly built during years of easy financing.

The episode fueled fears that similar risks could be in the market, prompting JPMorgan CEO Jamie Dimon to warn that private credit risks were “hiding in plain sight” and that “cockroaches” could emerge when economic conditions worsen.

Bridgewater founder Ray Dalio is also present warned about increasing stress due to high rates of leveraged private asset squeezes as part of a broader private market squeeze in the venture capital and private credit markets.

When private loan investors report Issued more than 7 billion dollars Capital from other big Wall Street names such as Apollo, Ares and Blackstone continued to flow into private equity funds in the final months of last year.

Last week, KKR announced that it had completed a $2.5 billion fundraising for its Asia Credit Opportunities Fund II. TPG, one of the industry’s biggest players, closed more than $6 billion for its third flagship Credit Solutions fund in December, far surpassing its $4.5 billion target and doubling the size of its predecessor.

Neuberger Berman in November announced the latest closing of its fifth flagship private debt fund $7.3 billion, beating the original plan as demand from global institutional investors remains strong.

Granite Asia in December Temasek, backed by Khazanah Nasional and the Indonesian Investment Agency, announced the first close of its first pan-Asia private loan strategy, raising more than $350 million, highlighting demand from investors in the region. A first close is when a fund makes initial investment commitments and begins investing even though fundraising is ongoing.

When Dimon sounded the alarm on personal loans, JPMorgan seemed to reassess the market.

While underwriting standards have weakened in the market pocket, demand for private credit is being driven by structural forces, including steady funding needs among middle-market companies, infrastructure developers and asset-backed borrowers, JPMorgan’s Alternative Investments Outlook for 2026 said.

According to Goldman Sachs, personal loans have become a multi-trillion dollar market and a key allocation for many institutional investors. Pension funds, insurers and funds that once viewed the asset class as a niche alternative now see it as a long-term anchor in their portfolios.

“Concerns about a potential bubble in personal credit resurfaced in September 2025 when several US borrowers defaulted on large loans, particularly in the auto sector,” the investment bank said.

“Although comments from investors and other stakeholders outside the domestic US market are troubling, these defaults appear to be issuer-specific rather than systemic,” JPM said as demand for yields continued to outstrip supply, particularly in private equity deals.

There is also a structural element to a personal loan industry experts. As traditional banks refuse to lend due to regulatory constraints, private equity funds have become the main providers of capital to middle-market companies.

Reforms After the global financial crisis in 2008, for example, higher capital requirements and stricter risk-weighting rules made it more expensive for banks to hold risky corporate loans on their books, prompting many lenders to pull back from certain leveraged or customer financing areas and opening a gap in which private lending firms are stepping in.

This dynamic has reinforced the view that personal credit is no longer a niche strategy, but an important component of the financial system.

While fundraising is steady, signs of strain are becoming harder to ignore.

High interest rates have pushed up borrowing costs, leaving more companies scrambling to cover their private debt, Goldman Sachs warned.

About 15% of borrowers can no longer generate enough cash to fully service interest, while others operate with little margin for error, data provided by the bank showed.

While the rate cut could provide some relief, the investment bank said it would relieve pressure rather than correct underlying weaknesses.

Morningstar also warned 2026 is about worsening credit profiles among high- and low-quality borrowers as higher interest rates filter through balance sheets, especially relative to the very low levels between 2010 and 2021.

While concerns about leverage and borrower distress are not evenly distributed across markets, industry leaders point to significant differences between the US, Europe and Asia.

Personal loan markets in Asia are much less saturated than in the US and Europe, said Ming Eng, managing director of Granite Asia. “We’re not seeing leverage or yield erosion in the U.S. that people are worried about,” Eng said. “Asia is at a completely different stage of development.”

While the U.S. and European personal loan markets are highly competitive, leading to lighter structures and higher leverage, the Asian market remains relatively new, he explained. Many borrowers are founder-led companies or family-owned businesses that still rely on banks or equity financing to allow personal loans to grow.

“A lot of what we’ve seen in Asia is still very conservative,” Eng said. “Not financial engineering, there is little leverage behind the capital, strong terms and often a solid operating history.”

This distinction is important at a time when concerns about the quality of underwriting in developed markets are growing.