Anna Maria Andriotis

speaker

3,396 appearances 52 recordings 1 series first heard Jul 2017 last heard Dec 2022

Anna Maria Andriotis’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Personal Loans Make a Comeback: What You Need to Know Before Borrowing · 3 May 2022 podcast

Generally, unemployment and delinquencies are linked.

So when the unemployment rate rises, so do missed payments.

So the concern was,

But we're not going to extend more of these loans, originate more of these loans, when unemployment is skyrocketing, which increases the chances that consumers are not going to pay their bills.

But as we've seen so far, the exact opposite played out.

Even though unemployment surged in the beginning of the pandemic, a variety of assistance, including government stimulus efforts and deferment programs from lenders,

essentially resulted in delinquencies not skyrocketing.

Delinquencies for the most part remain quite low, especially compared to sort of historical standards and pre-pandemic levels.

So with the unemployment rate now being very low, delinquencies being very low, there's basically lenders are sort of looking at the market and it seems like a good time to extend more credit to consumers.

So what's interesting that's playing out right now and very different, very different from when the pandemic began, is that right now what we're seeing with both credit cards and personal loans,

is that originations for subprime consumers are rising substantially.

So this was the first space where lenders pulled back on when the pandemic began and unemployment shot up because generally speaking, people with lower credit scores, that is an indication that they are more at risk of not being able to pay their loans in the future.

But what we're seeing now is that subprime originations are up.

For example, with personal loans, lenders extended nearly $23 billion of personal loans to consumers with credit scores below 620 last year.

That roughly $23 billion was up 34% from a year earlier.

So overall, what's happening is that lenders are trying to make up for the balances that they lost, the originations that they

didn't actually make in 2020.

And so we're in this sort of stage of building back the loan book.

It's been going on since last year, and it's continuing.

And even if you have a low credit score, the rationale is, well, you're working.

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