SFA Research Corner: Unsecured Consumer ABS: Delinquencies on the Rise as Weaker Borrowers Struggle with Inflation
Provided by Structured Finance Association
By the end of Q3 2022, 22 million Americans held unsecured consumer debt—closed-end installment loans used primarily to consolidate existing debt, cover emergency expenses or make large purchases—with an average balance of $10,749. This represents a 35% increase over 2021 according to a recent TransUnion Report, which attributes the rise to “significant increases in lending to below prime risk tiers” and the wealth-eroding effect of persistent inflation. Issuance of ABS backed by unsecured consumer loans has reached $17 billion so far in 2022, a historical high. Industry analysts expect lower supply in 2023 as high prices, high interest rates and softer labor markets impact loan origination levels and investor demand.