Delinquencies on credit cards and personal loans are expected to rise to levels not seen since 2010, according to TransUnion. (iStock)
Next year, the rate at which U.S. consumers miss payments on credit cards and personal loans is expected to reach levels not seen since 2010, according to TransUnion Credit Forecast.
TransUnion projected that serious credit card delinquencies will increase from 2.1% at the end of 2022 to 2.6% at the end of 2023. Unsecured personal loan delinquency rates will increase from 4.1% to 4 .3% over the same period.
Despite projected growth in credit card and personal loan delinquency rates, serious auto loan delinquency rates are expected to decline slightly from 1.95% in 2022 to 1.90% in 2023.
The rise in delinquencies follows two years of aggressive loan growth, according to the report.
“Rapidly rising interest rates and stubbornly high inflation combined with fears of recession represent the latest in a series of significant challenges consumers have faced in recent years,” said Michele Raneri, Vice President of TransUnion and head of research and consulting in the United States. “So it’s not surprising to see pronounced increases in delinquency rates for credit cards and personal loans, two of the most popular credit products.”
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Consumers are well positioned to meet the challenges ahead
More than half (52%) of US consumers said they were optimistic about their financial future over the next 12 months despite a tighter lending environment and reduced access to credit, according to TransUnion’s recent report. Consumer Pulse study.
Twenty-six percent of respondents said they plan to apply for new credit or refinance next year. Of these, 53% plan to apply for a credit card, more than double the volume compared to all types of credit, according to the survey.
Auto loans are expected to rebound in 2023, with originations expected to grow from $27.5 million to $28.8 million in 2022.
Credit card issuance is expected to fall to $80.9 million in 2023 from $87.5 million in 2022 as lenders tighten requirements and credit becomes harder to obtain, according to TransUnion. Despite the slowdown, the number of new cards opened will remain much higher than at any time in the past decade.
Personal loan origination volumes are also expected to slow to $19.3 million, returning to more normal levels after unusually high volumes in 2022, TransUnion said.
“We expect demand for credit to remain strong, with lenders well positioned to respond,” Raneri said. “While unemployment is expected to rise next year, it should remain relatively low, a key element for a healthy consumer credit market.”
If you’ve incurred credit card debt and need help paying it off, you might consider consolidating it with a personal loan. You can visit Credible to compare multiple personal lenders at once and find the best interest rate for you..
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Economists warn of a coming recession
Fears of an economic slowdown are the next challenge for the United States, economists said.
Bank of America (BofA) economists planned that a recession could come in the first quarter of next year and could last until the third quarter of 2023.
The prediction comes as the US gross domestic product (GDP) shows signs of decline.
Fannie Mae’s Economics and Strategy Research (ESR) Group expected a 0.6% contraction, down a tenth from its previous forecast, in gross domestic product (GDP) growth in 2023. , according to his latest economic forecasts.
“The economy continues to slide into a modest recession, which we expect will begin in the new year, with housing leading the slowdown,” said Doug Duncan, chief economist at Fannie Mae. “Rising interest rates triggered the typical reduction in residential fixed investment, which historically has led to either an economic slowdown or a recession.”
“From our perspective, the good news is that demographics remain supportive of housing, so the sector looks well positioned to help pull the economy out of what we expect will be a brief recession,” Duncan continued.
If you’re struggling to manage your finances in today’s economy, consider paying off high-interest debt with a personal loan at a lower interest rate and potentially reduce your monthly payments. You can visit Credible to compare personal loan rates from multiple lenders at once and find the rate that’s right for you..
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