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Personal Loan Originations Continue a Slow Recovery

Q1 2021 IIR Personal Loan Summary

Personal loan originations began to recover in the Q4 2020, steadily growing after the market contracted nearly 50% in Q2 2020, and 30% in Q3 2020.

Originations were still 20% below Q4 2019 levels. FinTechs and Bank lenders continue to see more significant year-over-year declines. In Q1 2021, total balances fell for the fourth consecutive quarter – led by 10%+ declines in the below prime tiers. Interestingly, super prime borrowers experienced a 6.3% increase in balance growth during the same timeframe. Serious delinquency rates dropped 73 basis points in the last year and now stand at 2.66% as of Q1 2021, even as the number of accounts in accommodation declines. Government stimulus and higher savings rates continue to contribute to lower delinquency.

Analysis

While many lenders expect to increase in the next quarters, we expect consumer demand for personal loans to grow at a slower pace. Personal loans are frequently used to consolidate debt, and credit card balances were substantially lower in 2020, taking time to rebuild. We expect to see greater activity as additional states reopen their economies, as people seek to finance vacations, house improvements, and other significant purchases. We also expect lenders to develop confidence in the economy and expand their buy-boxes to include higher-risk customers, which might help the economy flourish.

Marcadis Singer, PA
5104 South Westshore Blvd.,
Tampa, Florida.
Phone: (813) 288-1881

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