June 13, 2020

Changing Climate in the Consumer Lending Marketplace: What We’re Seeing and Hearing​

Jim Stewart

Jim Stewart

CEO, Epic Research

Three Things We’re Hearing

  • Personal loan rates are in flux
  • Student lending is approaching peak season with a big question
  • Consumer delinquencies continue at lower than expected rates

Today’s newsletter takes 2 minutes to read

Personal Loan Rates are in Flux

  • Personal loan originations in April were roughly half the level of early March 2020 and 62% below April 2019 originations
Total_Consumer_Finanace_Installments
  • However, recent securitization activity has brought a number of fintechs back to the aggregator and origination markets, with personal loan pricing fluctuating in both directions
PERSONAL_LOAN_rates_06122020

Student Lending Still in Limbo

  • Competition for in school student loans has increased in each of the past three years
  • While early 2020 mail volume is down, previous year trends would indicate that competition is likely to heat up - 2019 volume overall was 33% higher than 2018, driven largely by increased volume from Discover (+26%) and College Ave (+90%v
In-school_Mail_vol_month
  • January through April 2020 mail volume is down 18% vs. 2019, likely impacted by the pandemic
  • However, online search volume for “Private Student Loans” has been running higher than last year, possibly due to stress on families’ finances due to the pandemic, increasing loan demand
SEARCH_Pvt_Student_Loan_YoY
  • The pandemic continues to provide uncertainty; however, recent announcements from colleges have continued to trend towards students being on campus this fall
College-plans-to-reopen (1)
  • Many families are likely waiting longer to make their final decisions on loans

Payments

  • We continue to hear that consumer loan asset quality is holding up better than would be expected in the current economic environment
  • This chart from Equifax shows credit card delinquency actually down since early March
  • One factor explaining this is the data below showing that personal income has actually risen since February due to stimulus measures and unemployment benefits
Personal Income Components- Month-over-Month Change

Going Forward

  • Lending markets continue to slowly reopen
  • Post forbearance asset quality remains a wild card

Thank you for reading.

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Jim Stewart
www.epicresearch.net

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