Private credit is buying the loans behind your swipes. In today’s rapidly evolving financial landscape, private credit is making waves by stepping into roles traditionally held by banks, specifically in consumer finance. As we move into 2026, understanding this trend is crucial for consumers and investors alike.

At its core, private credit refers to non-bank lending, where loans are originated and held by private funds like direct lenders, private debt funds, and business development companies (BDCs). In simpler terms, these are financial institutions or funds that provide loans without the regulatory framework that governs traditional banks.

Historically, the rise of private credit can be traced back to significant regulatory changes that occurred in the wake of the 2008 financial crisis. Banks tightened their lending operations due to increased capital requirements and a shift in risk appetite, creating a notable gap in the market. Private funds filled this void, offering more flexible lending structures tailored to the needs of borrowers. This shift has allowed various sectors, including corporate lending and now, increasingly, consumer credit, to flourish under the private credit model.

Fast forward to 2026, and we’re witnessing a major expansion of private credit into two key areas: consumer debt and asset-based finance. This marks a significant departure from the traditional focus on middle-market corporate loans. Financial Times recently reported a noticeable increase in private credit firms’ exposure to consumer debt and buy now, pay later (BNPL) assets, which has sparked discussions around the risks that accompany this shift.

Consumer debt, such as credit cards and personal loans, provides attractive yields for private credit firms. However, the implications for borrowers and the financial system are complex. BNPL distribution models facilitate the offloading of loans into private vehicles, a practice that supports growth but may obscure the risks involved. As we navigate this landscape, it's essential to recognize that these firms are effectively acting as banks, but without the same level of oversight or transparency.

Private credit managers are drawn to consumer financing due to the promise of attractive spreads and shorter-duration cash flows, but this can be a double-edged sword. In a downturn, rising delinquencies could threaten stability and lead to significant losses, particularly in unsecured sectors like credit cards and BNPL.

As we delve deeper into this topic, it’s important to understand the motivations behind this trend and the risks it carries for everyday consumers and investors. The expansion of private credit into consumer finance is emblematic of a broader change in the financial landscape, one fraught with both opportunity and potential peril.

The private credit sector has experienced remarkable growth in recent years, becoming an important player in the lending landscape. Major firms like Churchill and Nuveen have raised over $16 billion for senior lending, reflecting an increasing institutional appetite for the returns private credit can offer. KKR's recent $2.5 billion raise for an Asia-focused private credit fund further exemplifies the global interest in this investment strategy. By the end of 2025, private capital deals totaled an astounding $2.3 trillion, signaling sustained momentum in this space.

Investors are drawn to private credit as it can provide diversification and greater access to tailored lending opportunities. Unlike traditional bank lending, private credit can offer customization in deals, including specific covenants and collateral arrangements that might not be available in larger, syndicated markets. This unique positioning allows private credit to reshape the financing landscape, particularly as it moves into consumer lending and asset-based finance.

However, while the growth prospects of private credit are enticing, they come with inherent risks that must be carefully considered. A common point of concern among industry analysts and observers is the quality of underwriting standards as private credit firms increasingly expand their portfolios into consumer debt. Critics argue that as the market heats up, underwriting practices could loosen. This is particularly worrying given the unsecured nature of many consumer loans, such as credit cards and BNPL offerings, which can expose investors to significant loss if borrowers default.

Liquidity mismatches also present a challenge. Many private credit investments are structured to price infrequently, while the underlying assets they hold may not retain their value during times of economic stress. This disconnect creates a risk for investors, who might find it difficult to sell their holdings or receive timely valuations, especially if market conditions deteriorate rapidly. As we move deeper into 2026, the implications of these trends will be critical for both investors and everyday consumers.

Additionally, as unemployment rates rise or refinancing options tighten, we might see delinquencies spike in unsecured consumer credit markets. This leads to the critical question: Can the promise of higher yields justify the risks involved? For investors and the general public alike, understanding the full breadth of private credit’s potential impacts in 2026 will be essential. The landscape of private credit is changing rapidly, and while opportunity abounds, it is vital to keep an eye on the associated risks.

This ongoing debate—between the potential for higher returns and the real risks involved—will continue to shape how private credit is viewed. As more consumers come into contact with private credit products through their everyday financial interactions, it becomes important for them to understand not just the allure of favorable lending terms but also the underlying mechanisms and risks that private lenders may impose. Understanding the financial landscape of private credit is a crucial step for informed consumer behavior and investment strategy, particularly as we move through 2026.

As the landscape of private credit expands into consumer finance, it’s essential for everyday investors to take a thoughtful approach when evaluating these investments. Here’s a practical checklist to guide your assessment of exposure to private credit:

• Understand the Type of Private Credit Owned: Familiarize yourself with the specific nature of your private credit investments. Are you involved in corporate direct lending, consumer receivables, or asset-based finance? Each category carries distinct risks and rewards.
• Demand Transparency Regarding Risks: Ensure you have access to clear information on various risk metrics, such as default rates, non-accruals, recovery assumptions, and any concentration risks tied to single originators. Understanding the terms of redemption is also critical, especially in volatile markets.
• Stress-Test Investment Theses: Consider how your investments would perform under adverse conditions. What if delinquencies increase, unemployment rises, or borrowing costs stay high for longer? Stress-testing your portfolio in these scenarios ensures you’re not blindsided when market conditions change.

This kind of diligence is particularly important now, as private credit investments can yield higher returns but also come with increased risks, especially in the consumer sector. Knowing what you own and the potential implications of economic fluctuations is crucial.

As we navigate the rapidly changing terrain of private credit, understanding its role in personal finance and investment strategy is paramount. The shift towards consumer finance in 2026 highlights how private credit is not merely a trend but a foundational change in the financial ecosystem. The allure of higher yields gained from private credit does not come without challenges. With increased risk comes the impartial need for thorough evaluation and awareness.

Investors must consider both the potential for attractive returns and the systemic risks that accompany exposure to private credit. As more individuals engage with these products through everyday financial transactions—like credit cards and personal loans—the line between traditional banking and private lending becomes increasingly blurred.

Charlet Sanieoff emphasizes that informed investing requires understanding not just the returns but also the risks and mechanics behind private credit. Investors should feel empowered to ask the right questions and seek transparency in their investment choices.

As we look ahead into 2026 and beyond, it’s essential to stay informed on how private credit might impact your financial landscape. I encourage readers to share their thoughts on private credit's role in their financial lives. Your insights could be invaluable to others navigating this complex landscape. Join the conversation and position yourself as a well-informed participant in the evolving financial world.