TransUnion Expects Payments to Non-Preferred Borrowers to Continue to Increase on Many Loans … | News

CHICAGO, Dec. 15, 2021 (GLOBE NEWSWIRE) – The continued expansion of loans, including to non-privileged consumers, is expected to occur in 2022 with origination levels reaching or exceeding pre-pandemic levels, according to the news. TransUnion publication (NYSE: TRU) Consumer credit forecasts for financial services 2022. For auto and personal loans, typically higher risk consumers account for a growing share of origination volume, with the forecast providing information as to why these larger loans will benefit the entire credit market. the consumption.

TransUnion’s forecast revealed that the auto, credit card and personal loan markets are expected to continue to grow in the non-privileged segment of the market (comprised of subprime and near-prime risk levels) as financial institutions are recalibrating their growth strategies. This expansion is occurring as serious delinquency rates remain well below pre-pandemic levels.

“At the height of the pandemic, many lenders pulled out and tightened underwriting to cover risks in a time of great uncertainty,” said Charlie Wise, head of global research and advisory at TransUnion. “Consumer performance, however, remained strong, which restored lender confidence. The economy is normalizing and continuing to grow, and these signs of renewed strength encourage lenders not only to focus on less risky consumers, but to provide better access to people who may be considered to be at risk. higher credit.

Changes in non-prime arrangements are expected to impact many credit industries. For example:

Personal loan issuance is expected to continue increasing in 2022, marking seven consecutive quarterly increases. Arrangements to unprivileged and privileged and senior consumers are expected to increase in 2022 and resemble pre-pandemic origination volumes – the levels last seen in 2019. Auto loan origination is expected to increase from a projected $ 28. 3 million in 2021 to 28.9 million in 2022 – well above the 26.8 million arrangements observed in 2020. Non-privileged arrangements are expected to increase from 9.4 million in 2021 to 10.0 million in 2022, which represents a higher share of all auto loans. rising from 29.2 million in 2021 to 28.8 million in 2022, the number of loans granted to this group of consumers remains well above the levels of 2020 (20.4 million) and 2019 (26.3 million). The share of non-privileged borrower accounts is expected to be 41% in 2022 – near 2021 levels (42%) – and above pre-pandemic levels of 38% in 2019.

Original levels over the years

* TransUnion forecast includes Q1, Q2, Q3 and Q4 of 2022 ** TransUnion forecast includes Q3 and Q4 of 2021

“The consumer landscape is starting to look more like the pre-pandemic era. With the expiration of forbearance programs and the depletion of stimulus funds, the demand for credit is increasing and consumers are reassessing their credit needs, which is a sign of a buoyant and functioning economy. The year 2022 will mark a continued return of lending to the credit market, which will help fuel the continued resurgence in consumer spending, ”added Wise.

TransUnion’s forecast is based on various economic assumptions, such as gross domestic product, house prices, personal disposable income, and unemployment rates. The forecast could change in the event of unforeseen shocks to the economy, for example if the omicron COVID-19 variant disrupts recovery efforts, if house prices fall unexpectedly, or if inflation continues to remain high over the course of the year. next year. Better-than-expected improvements in the economy, such as potential increases in GDP and disposable income, could also affect these forecasts.

For more information on the TransUnion 2022 forecast and to register for a webinar providing detailed projections, please Click here.

Trend 1: Card balances will increase as consumer spending increases

Snapshot Credit card balances are expected to continue their upward trend in 2022, following strong growth in bank card creations in 2021 (a record 19.3 million creations occurred in the second quarter of 2021). This growth should fuel the continued recovery in consumer spending throughout the summer and into the holiday shopping season. In the first quarter of 2022, balances are expected to show up to 10% year-over-year growth and then stabilize – with spending levels remaining below pre-pandemic levels. By the fourth quarter of 2022, total balances are expected to reach $ 805.7 billion, the highest level since the start of the pandemic and an increase of almost 3% year-on-year. As more consumers apply for credit and ramp up spending, defaults are expected to hit 1.74% by year-end, while remaining at a healthy level and below bank rates. before the pandemic.

“While consumer spending is expected to increase, we don’t expect balances to reach the same levels as in 2019. There is still some consumer liquidity in the market, which could slow the growth of sales. Once we see a return to larger card-driven purchases – such as travel and entertainment expenses, particularly international travel – we can anticipate a more significant increase in card balances. We expect consumer bank card delinquency to continue to increase due to a return to traditional seasonal patterns. “

Paul Siegfried, Senior Vice President and Chief Credit Card Business Officer at TransUnion

Trend 2: personal loans will rebound strongly in 2022

Snapshot With consumer spending set to increase in 2022, TransUnion forecasts predict that this could lead to a continued rebound in the consumer loan market, especially as consumers begin to look again for unsecured personal loans to shore up balances. croissants from their cards. Personal loan origination is expected to increase by 11% among non-privileged consumers in 2022 and 14% among privileged and senior consumers. This annual growth is driven by significant year-over-year growth in the first quarter (creations in the first quarter of 2021 had not yet picked up) and more modest growth throughout the year. Bad debts are expected to increase slightly throughout 2022.

“At the start of the pandemic in 2020, many personal lenders backed down considerably. This market was slow to recover until early 2021, as consumers had cash left after stimulus checks and lower spending. With lenders keen to grow, we expect the robust fixtures we saw from the second quarter of 2021 to continue through 2022. This growth will be driven by a possible return in demand for credit card consolidation loans. as card balances increase.

Liz Pagel, Senior Vice President and Corporate Head of Consumer Loans at TransUnion

Trend 3: Vehicle Inventory Impacts Automotive Market Sales

Instant Analysis The inventory challenge is likely to be the single most important factor that will impact vehicle sales in the auto industry next year. In terms of growth, the majority of new auto loans in the non-prime segment are expected to come from the subprime risk level. While overall growth will remain subdued, consumer delinquency rates are also expected to remain at healthy levels through 2022.

“Overall, auto creations are expected to remain stable as vehicle supply shortages challenge sales growth. However, consumer demand for vehicles has not diminished, and as we see increasing inventory, this will likely influence origination growth. Lenders are also eager to return to credit and will expand into the non-premium segment of the market to meet consumer demand, especially as consumer performance has remained strong. “

Satyan Merchant, Senior Vice President and Automotive Business Leader at TransUnion

Trend 4: Home equity available on the rise for owners

Snapshot The appreciation in home prices that occurred in 2021 positioned homeowners to have increased their home equity with the median available equity per consumer at $ 123,747 in Q3 2021. This equity of the home is expected to significantly exceed non-mortgage debt balances which is $ 10,151 per consumer. This offers homeowners a way to reduce their outstanding non-mortgage debt through a Home Equity Line of Credit (HELOC) or by drawing on their home equity. The Home Price Index (HPI) is expected to rise throughout next year and by the fourth quarter of 2022, median available home equity per consumer is expected to reach $ 129,528, an increase of 5 % year-on-year. Despite the increase in refinancing in 2021 due to low interest rates, more than 20 million consumers are still expected to benefit from rate and term refinancing in the new year.

“Following the increase in mortgage origination activity that we saw in 2021 for both new home purchases and refinancing, homeowners will be well positioned by 2022. Home prices are expected to continue. their upward trajectory, which will allow owners to build up more equity. This helps open the door to forms of financing that allow homeowners to tap that equity, like a HELOC and reduce other unpaid debts.

Joe Mellman, Senior Vice President and Mortgage Business Leader at TransUnion

For more information on the TransUnion 2022 forecast and to register for a webinar providing detailed projections, please Click here.

About TransUnion (NYSE: TRU) TransUnion is a global information and analysis company that makes trust in the modern economy possible. To do this, we provide a workable image of each person so that they can be reliably represented in the market. As a result, businesses and consumers can transact with confidence and achieve great things. We call it Information for Good®.

With a leading presence in more than 30 countries on five continents, TransUnion provides solutions that help create business opportunities, great experiences and personal empowerment for hundreds of millions of people.

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