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Credit card and personal loan delinquencies are expected to rise to levels not seen since 2010, according to TransUnion. (iStock)
The rate of US consumers delinquent on credit card and personal loan payments is expected to surge next year to levels not seen since 2010. TransUnion credit forecast.
TransUnion forecasts that serious credit card delinquency rates will rise from 2.1% at the end of 2022 to 2.6% at the end of 2023.
Credit card and personal loan delinquency rates are projected to increase, while severe auto loan delinquency rates are expected to moderately decline from 1.95% in 2022 to 1.90% in 2023.
The rising delinquency rate follows two years of aggressive loan growth, according to the report.
Michele Llanelli, vice president and head of U.S. research and consulting at TransUnion, said, “The combination of rapidly rising interest rates, stubbornly high inflation and fears of a recession is what consumers are facing in recent years. It’s the latest in a series of significant challenges.” “It’s no surprise that credit card and personal loan delinquency rates have risen significantly — two popular credit products.”
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Middle-class households are using credit cards to fill income gaps: survey
Consumers are well-equipped to meet the challenges ahead
Recent data from TransUnion shows that more than half (52%) of U.S. consumers expect to pay more in the next 12 months, despite facing a tighter lending environment and reduced access to credit over the next 12 months. He said he is optimistic about the financial future of the month. consumer pulse survey.
Twenty-six percent of respondents said they plan to consider new loans or refinancing next year. The survey found that 53% of them plan to apply for a credit card, more than double that of all credit types.
Auto loans are expected to recover in 2023, rising to $28.8 million from $27.5 million in 2022. In addition, as homeowners seek to leverage the significant amount of available equity held by Home, his equity originations are expected to grow by 24% in 2023. their home.
Credit card originations are expected to fall from $87.5 million in 2022 to $80.9 million in 2023 as lenders tighten requirements and make it harder to get credit, according to TransUnion. Despite the slowdown, the number of new cards opened remains far higher than at any point in the last decade.
Personal loan originations are also expected to slow to $19.3 million, returning to normal levels after recording an unusually high volume in 2022, according to Transunion.
“Lenders are ready to respond and we expect demand for credit to remain strong,” Mr. Llanelli said. “The unemployment rate is likely to rise next year, but will remain relatively low, a key factor for a healthy consumer credit market,” he said.
If you have credit card debt and need help paying it off, you can consider consolidating with a personal loan. Visit Credible to compare multiple personal loan lenders at once and find the best interest rates.
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Economists warn of upcoming recession
Economists say fears of an economic slowdown are the next challenge for the United States.
Economist at Bank of America (BofA) predicted A Recession Could Happen in the First Quarter of Next Year and Continue By Q3 2023.
This forecast comes at a time when US Gross Domestic Product (GDP) is showing signs of declining.
Fannie Mae’s Economic and Strategic Research (ESR) group had forecast gross domestic product (GDP) growth in 2023 to contract by 0.6%, a tenfold decline from previous forecasts. latest economic forecast.
“The economy continues to slide towards a mild recession, which is expected to start in the new year, with housing leading the slowdown,” said Fannie Mae chief economist Doug Duncan. “Rising interest rates have sparked the typical decline in housing investment that has historically led to economic slowdowns or recessions.”
“In our view, the good news is that demographics are still favorable to housing, and the sector looks set to help guide the economy out of the short-term recession we expect,” Duncan said. said.
If you’re struggling to manage your finances in the current financial climate, consider paying off your high-interest debt with a low-interest personal loan and lowering your monthly payments. Visit Credible to compare personal loan rates from multiple lenders at once to find the right rate for you.
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