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A recent study by Transunion, one of the largest consumer credit agencies, predicts that more Americans will fall behind on their loans in 2023. This increase in terms is happening across a wide range of loan types: credit cards, unsecured personal loans. and auto loans as consumer demand remains strong despite rising prices.

  • A recent study by Transunion predicts that more Americans will fall behind on their loan payments in 2023.
  • Currently, 2.1% of people with credit cards fall behind on their payments, but Transunion predicts that number will rise to 2.6% by the end of 2023.
  • This growth is driven by rising prices and high interest rates, but also by growing confidence in the economy.

Increase in loan defaults

Transunion’s Q3 2022 report predicts that by 2023, more Americans will be behind on their loan payments than at any time since 2010. Right now, 2.1% of people with credit cards fall behind on their payments, but Transunions predicts that number will rise. reaching 2.6% by the end of 2023.

There are a number of reasons why violations are on the rise. One is that many people have taken loans in the last year. In fact, the demand for credit is growing. In 2022, Americans opened a record 35 million new credit card accounts and 2.7 million new personal loans.

Unfortunately, economic conditions have changed since early 2021. American consumers are now facing high inflation and high interest rates. A combination of these factors means that loans that seemed reasonable in early 2021 are now proving difficult to repay for many borrowers.

This is true for a wide range of loan types. During the same period that credit card delinquencies will rise from 2.1% to 2.6%, delinquencies on unsecured personal loans will likely rise to 4.3% from 4.1%, and are projected to fall back on their auto loans. the remaining borrowers’ rate will also rise to 1.95% in early 2023.

Both trust and debt are growing

At first glance, the increasing distortion may suggest that consumers are struggling with their finances. However, the same Transunion study also found that there is widespread optimism about the US economy.

More than half of the 2,800 Americans surveyed in the survey were optimistic about their finances over the next 12 months, TransUnion said. The youngest generations expressed the most confidence.

This optimism may go some way to explaining the explosion in personal debt over the past year. Through 2022, households increased debt at the fastest rate in 15 years, driven by significant increases in credit card use and mortgage balances. According to the New York Fed, total credit card balances collectively rose more than 15% from the same period in 2021, the biggest annual jump in 20 years.

Increasing consumer debt in itself is not a worrying sign for the economy or individual consumers. it proves that people have confidence in the economy. However, as we’ve seen over the past year, the economic situation can change quickly, and that can leave some borrowers behind on their payments.

Above all, it is important that consumers borrow responsibly, making sure they can meet their loan repayments before taking on unsustainable debt in a rising interest rate environment.

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