Third Quarter 2017 Showed an Increase in Personal Loan Delinquency

Lend EDU - 17 Jan 2018 - Andrew Robach

The American Bankers Association (ABA) Consumer Credit Delinquency Bulletin recently revealed that closed-end loan delinquencies increased in the third quarter. Delinquencies are tracked in eight categories for closed-end loans in a composite ratio.

That ratio, although it increased in the third quarter by 12 basis points to a level of 1.68 percent, is still lower than the average over the past 15 years. That 15-year average is 2.15 percent.

What This Increase Means

Despite an increase in delinquencies for personal loans and automobile loans, the economy is still going strong. There’s a low unemployment rate in the country, and incomes are increasing, which is leading consumers to feel better about taking on personal and automobile loans.

“The bottom line is that consumers are feeling comfortable with their finances and have a proven record of successfully meeting their financial obligations over the last several years,” James Chessen, ABA’s chief economist, said in the article on

How Responsible Are Consumers Being with Their Credit Cards and Other Loans?

On a positive note, the rate of delinquent credit cards decreased during the third quarter. In addition, out of 11 categories aimed at tracking individual consumer data, five categories showed drops in delinquencies and five others showed increases. The remaining category was unchanged.

Bank cards showed a drop of five basis points, bringing the delinquency level to 2.62 percent. That level has enjoyed near historic lows for over five years now.

Home loans were a mix of increases and decreases when it came to delinquencies. Equity loans for the home dropped eight basis points, reaching a level of 2.42 percent. But delinquencies for home equity lines of credit snuck up one basis point, to a level of 1.08 percent.

Meanwhile, loan delinquencies for property improvement went up 13 basis points, reaching a level of 1.08 percent.

With values for home properties continuing to climb, it means people will be experiencing larger amounts of home equity. That will help them have motivation to keep up their loans payments and protect their investment.

As far as auto loans, there wasn’t a change for the loans set up through auto dealers. They remained at 1.84 percent. When people arranged their auto financing through a bank however, the basis points went up eight points, hitting a level of 1.12 percent.

How 2018 Should Fare for Delinquencies

Experts are calling for a decent year for delinquencies in 2018. They predict stability, based on the strength of the economy and the low rate of unemployment. With jobs available and wages starting to creep up, it bodes well for delinquency rates.

In addition to that, experts point to the tax reform recently signed by President Donald Trump as one more reason delinquencies should stay stable this year. The tax reform will put more money in consumers’ pockets so they’ll have more money available to meet their loan payments. If consumers maintain the financial responsibility they’ve shown in recent years, the tax reform will only help.