Shopping with credit card may be an example of racking up "bad debt" if you can't pay the balance off each month.
Millennials — already laden with student loans — are adding a different kind of debt to their balance sheets: personal loans.
Those were the findings following an analysis of borrower data from 2015 through August 2018 by LendingPoint, a provider of personal loans. The lender studied 49,545 funded loans in all.
Personal loans typically have a set term of three to five years and generally charge a fixed interest rate. People tap them for a range of reasons, including emergencies and wedding finances.
You can access them at credit unions, consumer banks and online lenders.
These loans are unsecured, but if you default, your lender can assess late fees, and in extreme cases, try to garnish your wages and send debt collectors after you.
Back in 2015, roughly 12 percent of the individuals who took out a personal loan with LendingPoint were 35 and younger.
Since then, that proportion has roughly doubled: As of 2018, that age cohort now accounts for about a quarter of applicants.
"Millennials are driving the borrowing," said Mark Lorimer, chief marketing officer of LendingPoint.
"They are rapidly coming into their earnings and credit wheelhouse," he said. "It takes time to become creditworthy and we're seeing a higher proportion of millennials getting there."
Here are some likely drivers of the younger crowd's penchant for personal loans.
Growing balances 
Overall, more individuals are taking on personal loans.
In the second quarter of 2018, outstanding personal loan balances hit a high of $125.4 billion, up 17.5 percent from the year-ago period, according to TransUnion.
The number of accounts has also been climbing, reaching 19.5 million in the second quarter of 2018 and reflecting a 12.5 percent increase from the second quarter of 2017, TransUnion found.
Used responsibly, personal loans can be a valuable tool if you're trying to consolidate high-interest debt and pay it all off.
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Depending on your credit score, interest rates on a personal loan can run as low as just over 3 percent to as high as nearly 36 percent, according to MagnifyMoney, a personal finance site.
In comparison, average credit card rates exceed 17 percent, Bankrate.com found. The latest interest rate hike from the Federal Reserve made it more costly to keep a balance on plastic.
Rounding up and squashing high-interest rate debt may be the reason why millennials are willing to take out personal loans, Lorimer said.
"Millennials don't like credit card debt as much as boomers did," he said. "They've seen their parents run into difficulty with compounding debt."
Borrow responsibly
There's a fine line between taking out a personal loan to clean up your balance sheet and ending up in over your head in red ink.
Here are a few things to bear in mind:
Borrow what you can afford to repay: A personal loan won't help you if you can't afford the monthly payment. Think about how this cost fits in with the rest of your regular expenses.
One rule of thumb is the "back-end ratio," meaning your monthly housing costs and debt payments should not exceed 36 percent of your gross monthly income.
Know why you're borrowing: It's one thing to take out a loan to kill your credit card balances. If you're trying to finance your wedding or some other large expenditure, consider budgeting and saving for that cost instead.
Also, if you're trying to squash consumer debt, make sure you address your spending habits. A personal loan won't help if you're still whipping out the plastic at the register.
Get familiar with your fees: Shop lenders to find the best rates and keep an eye out for surprise expenses. These include origination fees and prepayment penalties.
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