Over the past several months, I’ve had the opportunity to speak with several leaders in the consumer credit and collections industry. In addition, I’ve scoured the 2021 TransUnion Consumer Credit Forecast and analyzed the Cox Automotive Forecast. Based on that information, as well as conversations I’ve had with financial institution leaders, here is what I expect to see in 2021:
When it comes to auto loan portfolios, lenders are going to focus on originating low-risk loans with credit profiles in the prime and super prime area. In addition, used car values are expected to increase. As a matter of fact, in mid-March we saw used car values increase by 3.74% over the same period of February, according to Manheim. Overall, delinquencies are expected to remain relatively flat.
Throughout 2021, we expect to see more of what we saw in 2020. While there may be some concerns regarding loans and loan-modification programs, the industry leaders I’ve spoken to don’t seem to think loan modification is going to have a significant impact on delinquencies because by and large, these credit union leaders have always been focused on their philosophy of ‘people helping people.’ So, whether they offered their borrowers extensions, reduced loan payments, reduced rates, etc., they expect to maintain loyalty from their account holders because there is already a strong foundational relationship. And while they expect they’re going to see some delinquency, it certainly won’t be what they had initially anticipated as it relates to credit card portfolios. With credit underwriting standards tightening, balances are expected to continue to decline.
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