Lower interest rates and easing lending standards are brightening the outlook for the Zacks Consumer Loans industry. The Federal Reserve’s interest rate cuts and signs of decent economic growth are expected to sustain and even boost loan demand, supporting top-line growth.

While improved consumer credit scores and looser lending criteria are expanding the borrower base, muted consumer confidence is a concern. Despite several credit quality metrics creeping above the pre-pandemic levels, lower rates will likely support repayment capacity. So, industry players like Credit Acceptance Corporation (CACC Quick QuoteCACC - Free Report) , Enova International, Inc. (ENVA Quick QuoteENVA - Free Report) and Encore Capital Group, Inc. (ECPG Quick QuoteECPG - Free Report) are worth betting on.

About the Industry

The Zacks Consumer Loans industry comprises companies that provide mortgages, refinancing, home equity lines of credit, credit card loans, automobile loans, education/student loans and personal loans, among others. These help the industry players generate net interest income (NII), which forms the most important part of total revenues. The prospects of the companies in this industry are highly sensitive to the nation’s overall economic condition and consumer sentiments. In addition to offering the above-mentioned products and services, many consumer loan providers are involved in businesses like commercial lending, insurance, loan servicing and asset recovery. These support the companies in generating fee revenues. Furthermore, this helps the firms diversify revenue sources and be less dependent on the vagaries of the economy.

3 Themes Driving the Consumer Loan Industry's Future

Interest Rates & Loan Demand: The Federal Reserve has lowered interest rates by 175 basis points since 2024. However, any further near-term cut is less likely given the ongoing Middle East conflict and its impact on inflation. Moreover, consumer confidence has been subdued since late 2025 because of concerns related to jobs, income and high prices. In February, the Expectations Index remained below 80 for 13 straight months, a level that historically signals potential recession. Despite this, demand for consumer loans is expected to remain stable and even improve as rates remain low compared with historically high levels seen in 2024. Hence, industry players are expected to witness modest growth in net interest margin and NII going forward.

Lending Standards: With the nation’s big credit reporting agencies removing all tax liens from consumer credit reports since 2018, several consumers' credit scores have improved. This has raised the number of consumers for the industry participants. Further, easing credit lending standards is helping consumer loan providers meet loan demand.

Asset Quality: While lower interest rates will help borrowers to remain current on loan and interest repayments, the lingering macroeconomic and geopolitical headwinds are expected to result in persistent inflation. This will likely hurt borrowers' paying capacity to some extent. Hence, consumer loan providers are likely to set aside a huge amount of money for potential delinquent loans. Also, several credit quality metrics are trending above pre-pandemic levels.

Zacks Industry Rank Reflects a Bright Picture

The Zacks Consumer Loans industry is a 12-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #15, which places it in the top 6% of more than 240 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Over the past year, the industry’s earnings estimates for 2026 and 2027 have been revised upward by 25% and 10.4%, respectively.

Before we present a few stocks that you may want to add to your portfolio, let's take a look at the industry’s recent stock market performance and valuation picture.

Industry vs. Broader Market

The Zacks Consumer Loans industry has impressively outperformed the Zacks S&P 500 composite and its sector over the past two years.

The stocks in this industry have collectively soared 45.3% over this period, while the Zacks S&P 500 composite and the Zacks Finance sector have risen 29.7% and 24.3%, respectively.

Two-Year Price Performance


 

Industry Valuation

One might get a good sense of the industry’s relative valuation by looking at its price-to-book ratio (P/B), commonly used for valuing consumer loan stocks because of significant variations in their financial performance from one quarter to the next.

The industry currently has a trailing 12-month P/B of 0.67X, below the median level of 0.77X over the past five years. This compares with the highest level of 1.07X and the lowest level of 0.55X over this period. The industry is trading at a considerable discount compared with the market at large, as the trailing 12-month P/B for the S&P 500 is 7.72X and the median level is 8.09X.

Price-to-Book Ratio (TTM)

As finance stocks typically have a lower P/B, comparing consumer loan providers with the S&P 500 may not make sense to many investors. However, comparing the group’s P/B ratio with that of its broader sector ensures that the group is trading at a decent discount. The Zacks Finance sector’s trailing 12-month P/B of 4.01X for the same period is way above the Zacks Consumer Loan industry’s ratio, as the chart below shows.

Price-to-Book Ratio (TTM)


 

3 Consumer Loan Stocks to Consider

Credit Acceptance Corporation: Headquartered in Southfield, MI, CACC offers financing programs and related products and services to automobile dealers across the United States, enabling them to sell vehicles to consumers irrespective of their credit history. Further, it is engaged in the business of reinsuring coverage under vehicle service contracts sold to consumers by dealers on vehicles financed by the company.

Revenue growth remains a major positive for Credit Acceptance, with the same witnessing a five-year (2020-2025) compound annual growth rate (CAGR) of 6.8%. Growth is primarily attributable to a steady rise in finance charges, which is also the main revenue component (accounting for 92.4% of total revenues in 2025). 

While finance charges are likely to witness headwinds from macroeconomic factors in the near term, the same will rebound once the operating backdrop improves. A decent rise in dealer enrolments and active dealers is also expected to support the company’s top-line growth.

The Zacks Consensus Estimate for earnings for 2026 and 2027 suggests growth of 17.6% and 12.9%, respectively. Shares of this Zacks Rank #2 (Buy) company have lost 1.5% over the past six months. It has a market cap of $4.8 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: CACC

Enova International: Based in Chicago, IL, Enova is a leading financial technology company focused on providing online financial services. The company caters to small businesses and capitalizes on its proprietary technology, analytics and customer service capabilities to underwrite and fund loans. 

Being an early entrant into online lending, the company has completed almost 65 million customer transactions and collected approximately 66 terabytes of consumer behavior data since its launch in 2004. This has enabled Enova to better analyze its specific customer base. This Zacks Rank #2 company’s proprietary underwriting systems leverage advanced risk analytics, including machine learning and artificial intelligence. 

Moreover, the company has been diversifying its operations, which will support its long-term growth. In December 2025, the company agreed to acquire Grasshopper Bancorp, which will uplift its earnings over time. This will also expand the company’s ability to deliver a more comprehensive suite of financial products through a national bank charter, expanding access to credit to those who were traditionally underserved by banks. 

The Zacks Consensus Estimate for earnings for 2026 and 2027 indicates an increase of 21.8% and 13.8%, respectively. Also, ENVA’s shares have gained 9.9% over the past six months. It has a market cap of $3.4 billion.

Price and Consensus: ENVA

Encore Capital: Based in San Diego, CA, ECPG provides debt recovery and related financial services worldwide. Through its global subsidiaries, the company acquires portfolios of charged-off consumer receivables from leading banks, credit unions and utility providers, leveraging data-driven strategies to optimize collections and portfolio performance.

Encore Capital plans to leverage its leadership position in portfolio purchasing and recovery as well as credit management services to bolster its market share worldwide. Over the years, the company’s portfolio purchases and collections have increased, which supported its top-line expansion. 

With rising delinquency/charge-off rates in the United States, there is more supply of non-performing loans. This offers Encore Capital an additional opportunity to purchase portfolios and apply its analytics and collections capabilities for higher returns. Additionally, as interest rates decline and borrowers' ability to repay loans improves, the company’s collections will likely become steadier.  

This Zacks Rank #1 stock has soared 62.1% over the past six months. ECPG’s earnings are expected to rise 9.7% in 2026 and 7.3% in 2027. The company has a market cap of $1.6 billion.

Price and Consensus: ECPG