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2 Consumer Loan Stocks to Buy on Favorable Industry Dynamics
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A higher-for-longer interest rate environment and easing lending standards are brightening the outlook for the Zacks Consumer Loans industry. The Federal Reserve has paused rate cuts and signaled a hike amid signs of higher inflation and a robust job market. Yet, decent economic growth is expected to continue and even boost loan demand, supporting top-line growth.
While looser lending criteria and increased usage of technology are expanding the borrower base, deteriorating consumer confidence remains a headwind. Nonetheless, industry players like Enova International, Inc. (ENVA - Free Report) and Encore Capital Group, Inc. (ECPG - Free Report) appear worth betting on now.
About the Industry
The Zacks Consumer Loans industry comprises companies that offer a broad range of lending products, including mortgages, refinancing, home equity lines of credit, credit card loans, automobile loans, education or student loans and personal loans. These lending activities generate net interest income (NII), which typically represents the largest component of total revenues. Hence, industry players’ performance is highly sensitive to overall economic conditions, interest-rate trends and consumer sentiment. Beyond traditional consumer lending, many industry participants also operate in areas such as commercial lending, insurance, loan servicing and asset recovery. These businesses generate fee-based revenues, helping companies diversify income streams and reduce dependence on spread income and fluctuations in the broader economy.
3 Key Trends Shaping the Consumer Loan Industry
Interest Rates & Loan Demand: After lowering interest rates by 175 basis points since 2024, the Federal Reserve paused its easing cycle and has adopted a hawkish stance. This shift reflects a strong job market and inflation remaining well above the central bank’s 2% target, exacerbated by the oil price shock stemming from geopolitical tensions in the Middle East. Moreover, consumer sentiment has remained weak since late 2025, with the Expectations Index staying below 80 for 19 consecutive months through August 2026, a threshold that has historically signaled an elevated risk of recession. Despite these headwinds, demand for consumer loans is expected to remain resilient and even improve, supported by decent economic growth and a still-low unemployment rate. As such, industry participants are likely to benefit from continued expansion in net interest margins (NIM) and NII in the coming quarters.
Automation to Improve Operating Efficiency: Consumer loan providers are increasingly leveraging artificial intelligence (AI), machine learning (ML), robotic process automation and digital platforms to streamline loan origination, underwriting, servicing and customer onboarding. AI-driven credit assessment models can analyze large volumes of customer data in real time, enabling faster and more precise lending decisions while reducing manual intervention. At the same time, digital onboarding tools are helping lower customer acquisition costs and improve the overall borrower experience. AI-powered servicing and collections platforms are also enhancing operational efficiency, strengthening risk monitoring and improving recovery processes. Over time, these technology investments are expected to lower processing costs, support scalable growth and improve profitability through stronger operating leverage and higher returns.
Asset Quality: While lower interest rates have helped borrowers stay current on loan and interest repayments, persistent macroeconomic and geopolitical headwinds have kept inflation elevated. This has prompted the central bank to signal a potential rate hike later this year, which could somewhat weaken borrowers’ repayment capacity. So, consumer loan providers are likely to set aside substantial reserves for potential delinquencies. Further, several credit quality metrics are already trending above pre-pandemic levels.
Zacks Industry Rank Reflects Bullish Prospects
The Zacks Consumer Loans industry is a 11-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #56, which places it in the top 23% of more than 245 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 confident in this group’s earnings growth potential. Over the past year, the industry’s earnings estimates for 2026 have been revised upward by 4.5%.
Before we present a couple of stocks that you may want to add to your portfolio, let's check the industry’s recent stock market performance and valuation picture.
Industry vs. Broader Market
The Zacks Consumer Loans industry has significantly outperformed the Zacks S&P 500 composite and its sector over the past two years.
The stocks in this industry have collectively jumped 80.8% over this period, while the Zacks S&P 500 composite and the Zacks Finance sector have risen 43% and 34.1%, 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-tangible book ratio (P/TB), 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/TB of 1.32X, above the median level of 1.08X over the past five years. This compares with the highest level of 1.50X and the lowest level of 0.76X over this period. The industry is trading at a huge discount compared with the market at large, as the trailing 12-month P/TB for the S&P 500 is 10.07X and the median level is 13.09X.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a lower P/TB, comparing consumer loan providers with the S&P 500 may not make sense to many investors. However, comparing the group’s P/TB ratio with that of its broader sector ensures that the group is trading at a discount. The Zacks Finance sector’s trailing 12-month P/TB of 6.16X for the same period is way above the Zacks Consumer Loan industry’s ratio, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
Add These 2 Consumer Loan Stocks to Your Portfolio
Enova International: Based in Chicago, IL, ENVA is a digital financial services company providing online loans and credit solutions to non-prime consumers and small and medium businesses (SMB). Using proprietary analytics, it offers installment loans, lines of credit and small business financing.
Being an early entrant into online lending, the company has completed approximately 65 million customer transactions and collected more than 66 terabytes of consumer behavior data since its launch in 2004. This has enabled Enova to better analyze its specific customer base and expand SMB lending. This Zacks Rank #2 (Buy) company’s proprietary underwriting systems leverage advanced risk analytics, including ML and AI. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company has been diversifying its operations, which will support its long-term growth. In December 2025, Enova agreed to acquire Grasshopper Bancorp, which will add a national bank charter, deposit-based funding and broader banking capabilities. Earlier buyouts of OnDeck and Headway Capital helped build Enova’s SMB lending platform and diversify the business beyond consumer credit. These moves are expected to boost the company’s competitive position and create a more diversified earnings base over time.
The Zacks Consensus Estimate for earnings for 2026 and 2027 indicates an increase of 34% and 29.5%, respectively. ENVA’s shares have gained 42.5% so far this year. It has a market cap of $5.6 billion.
Price and Consensus: ENVA
Encore Capital: Based in San Diego, CA, ECPG is a specialty finance/debt-purchasing and recovery company. 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 leverages its leadership position in portfolio purchasing and recovery as well as credit management services to bolster its market share worldwide. The United States remains its largest and most important growth market, positioning the company to benefit from a constructive consumer credit cycle. Additionally, while Europe remains competitive amid subdued lending activity, the company’s Cabot business delivers stable performance and improved efficiency.
Encore Capital's operating engine continues to deliver consistent outperformance, which is strengthening revenue visibility. Collections have exceeded expectations across recent periods, supported by enhanced consumer outreach, new technologies, advanced analytics and an expanded payer base. As of June 30, 2026, Estimated Remaining Collections (ERC) reached $10.18 billion, up 9% year over year. Over the next few quarters, management expects the benefit to shift from cash overs toward higher portfolio revenue as ERC curves are revised upward.
Year to date, shares of this Zacks Rank #2 company have soared 79.1%. ECPG’s earnings are expected to rise 23.9% in 2026 and 8.3% in 2027. The company has a market cap of $2.1 billion.
View the Zacks #1 Rank List
Image: Bigstock
2 Consumer Loan Stocks to Buy on Favorable Industry Dynamics
A higher-for-longer interest rate environment and easing lending standards are brightening the outlook for the Zacks Consumer Loans industry. The Federal Reserve has paused rate cuts and signaled a hike amid signs of higher inflation and a robust job market. Yet, decent economic growth is expected to continue and even boost loan demand, supporting top-line growth.
While looser lending criteria and increased usage of technology are expanding the borrower base, deteriorating consumer confidence remains a headwind. Nonetheless, industry players like Enova International, Inc. (ENVA - Free Report) and Encore Capital Group, Inc. (ECPG - Free Report) appear worth betting on now.
About the Industry
The Zacks Consumer Loans industry comprises companies that offer a broad range of lending products, including mortgages, refinancing, home equity lines of credit, credit card loans, automobile loans, education or student loans and personal loans. These lending activities generate net interest income (NII), which typically represents the largest component of total revenues. Hence, industry players’ performance is highly sensitive to overall economic conditions, interest-rate trends and consumer sentiment. Beyond traditional consumer lending, many industry participants also operate in areas such as commercial lending, insurance, loan servicing and asset recovery. These businesses generate fee-based revenues, helping companies diversify income streams and reduce dependence on spread income and fluctuations in the broader economy.
3 Key Trends Shaping the Consumer Loan Industry
Interest Rates & Loan Demand: After lowering interest rates by 175 basis points since 2024, the Federal Reserve paused its easing cycle and has adopted a hawkish stance. This shift reflects a strong job market and inflation remaining well above the central bank’s 2% target, exacerbated by the oil price shock stemming from geopolitical tensions in the Middle East. Moreover, consumer sentiment has remained weak since late 2025, with the Expectations Index staying below 80 for 19 consecutive months through August 2026, a threshold that has historically signaled an elevated risk of recession. Despite these headwinds, demand for consumer loans is expected to remain resilient and even improve, supported by decent economic growth and a still-low unemployment rate. As such, industry participants are likely to benefit from continued expansion in net interest margins (NIM) and NII in the coming quarters.
Automation to Improve Operating Efficiency: Consumer loan providers are increasingly leveraging artificial intelligence (AI), machine learning (ML), robotic process automation and digital platforms to streamline loan origination, underwriting, servicing and customer onboarding. AI-driven credit assessment models can analyze large volumes of customer data in real time, enabling faster and more precise lending decisions while reducing manual intervention. At the same time, digital onboarding tools are helping lower customer acquisition costs and improve the overall borrower experience. AI-powered servicing and collections platforms are also enhancing operational efficiency, strengthening risk monitoring and improving recovery processes. Over time, these technology investments are expected to lower processing costs, support scalable growth and improve profitability through stronger operating leverage and higher returns.
Asset Quality: While lower interest rates have helped borrowers stay current on loan and interest repayments, persistent macroeconomic and geopolitical headwinds have kept inflation elevated. This has prompted the central bank to signal a potential rate hike later this year, which could somewhat weaken borrowers’ repayment capacity. So, consumer loan providers are likely to set aside substantial reserves for potential delinquencies. Further, several credit quality metrics are already trending above pre-pandemic levels.
Zacks Industry Rank Reflects Bullish Prospects
The Zacks Consumer Loans industry is a 11-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #56, which places it in the top 23% of more than 245 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 confident in this group’s earnings growth potential. Over the past year, the industry’s earnings estimates for 2026 have been revised upward by 4.5%.
Before we present a couple of stocks that you may want to add to your portfolio, let's check the industry’s recent stock market performance and valuation picture.
Industry vs. Broader Market
The Zacks Consumer Loans industry has significantly outperformed the Zacks S&P 500 composite and its sector over the past two years.
The stocks in this industry have collectively jumped 80.8% over this period, while the Zacks S&P 500 composite and the Zacks Finance sector have risen 43% and 34.1%, 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-tangible book ratio (P/TB), 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/TB of 1.32X, above the median level of 1.08X over the past five years. This compares with the highest level of 1.50X and the lowest level of 0.76X over this period. The industry is trading at a huge discount compared with the market at large, as the trailing 12-month P/TB for the S&P 500 is 10.07X and the median level is 13.09X.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a lower P/TB, comparing consumer loan providers with the S&P 500 may not make sense to many investors. However, comparing the group’s P/TB ratio with that of its broader sector ensures that the group is trading at a discount. The Zacks Finance sector’s trailing 12-month P/TB of 6.16X for the same period is way above the Zacks Consumer Loan industry’s ratio, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
Add These 2 Consumer Loan Stocks to Your Portfolio
Enova International: Based in Chicago, IL, ENVA is a digital financial services company providing online loans and credit solutions to non-prime consumers and small and medium businesses (SMB). Using proprietary analytics, it offers installment loans, lines of credit and small business financing.
Being an early entrant into online lending, the company has completed approximately 65 million customer transactions and collected more than 66 terabytes of consumer behavior data since its launch in 2004. This has enabled Enova to better analyze its specific customer base and expand SMB lending. This Zacks Rank #2 (Buy) company’s proprietary underwriting systems leverage advanced risk analytics, including ML and AI. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company has been diversifying its operations, which will support its long-term growth. In December 2025, Enova agreed to acquire Grasshopper Bancorp, which will add a national bank charter, deposit-based funding and broader banking capabilities. Earlier buyouts of OnDeck and Headway Capital helped build Enova’s SMB lending platform and diversify the business beyond consumer credit. These moves are expected to boost the company’s competitive position and create a more diversified earnings base over time.
The Zacks Consensus Estimate for earnings for 2026 and 2027 indicates an increase of 34% and 29.5%, respectively. ENVA’s shares have gained 42.5% so far this year. It has a market cap of $5.6 billion.
Price and Consensus: ENVA
Encore Capital: Based in San Diego, CA, ECPG is a specialty finance/debt-purchasing and recovery company. 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 leverages its leadership position in portfolio purchasing and recovery as well as credit management services to bolster its market share worldwide. The United States remains its largest and most important growth market, positioning the company to benefit from a constructive consumer credit cycle. Additionally, while Europe remains competitive amid subdued lending activity, the company’s Cabot business delivers stable performance and improved efficiency.
Encore Capital's operating engine continues to deliver consistent outperformance, which is strengthening revenue visibility. Collections have exceeded expectations across recent periods, supported by enhanced consumer outreach, new technologies, advanced analytics and an expanded payer base. As of June 30, 2026, Estimated Remaining Collections (ERC) reached $10.18 billion, up 9% year over year. Over the next few quarters, management expects the benefit to shift from cash overs toward higher portfolio revenue as ERC curves are revised upward.
Year to date, shares of this Zacks Rank #2 company have soared 79.1%. ECPG’s earnings are expected to rise 23.9% in 2026 and 8.3% in 2027. The company has a market cap of $2.1 billion.
Price and Consensus: ECPG
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