Installment loan delinquencies fall across the country during fourth quarter 2017
The fourth quarter of 2017 saw a broad-based decline in delinquencies, with delinquencies in closed-end loans (like personal or auto loans) falling across the board and bank card delinquencies declining significantly, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Overall, delinquencies fell in 9 of the 11 individual consumer loan categories tracked by ABA.
The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 4 basis points to 1.64 percent of all accounts and remained well below the 15-year average of 2.14 percent. (See Historical Graphic.) For the first time since early 2012, delinquencies fell in all eight closed-end loan categories. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
“It’s rare to see delinquencies fall in nearly every category, and the levels continue to be very low by historical standards,” said James Chessen, ABA’s chief economist. “The steady creation of new jobs has been essential to keeping delinquencies low, and we’ve seen more than 10 million jobs filled in the past four years. Greater job stability and increased take home pay have allowed consumers to make more purchases while keeping balances low relative to their income.”
Delinquencies in bank cards (credit cards provided by banks) fell 16 basis points to 2.46 percent of all accounts, significantly below their 15-year average of 3.60 percent and the lowest quarter-end level in more than three years.
“Consumers are supported by a robust economy, and they continue to make judicious decisions when managing their debt levels,” Chessen said.
Delinquencies fell in two home-related categories and rose slightly in one. Home equity loan delinquencies fell 14 basis points to 2.28 percent of all accounts, dipping further below their 15-year average of 2.92 percent. Property improvement loan delinquencies fell 4 basis points to 1.04 percent of all accounts, remaining well below their 15-year average of 1.32 percent. Home equity line of credit delinquencies rose 8 basis points to 1.16 percent of all accounts, holding just under their 15-year average of 1.16 percent.
“The positive trajectory of home-related delinquencies goes hand-in-hand with a growing economy and an improving housing market,” said Chessen. “Rising property values boost wealth, increase confidence in the ability to meet future obligations and give homeowners an extra incentive to stay current.”
Delinquencies in indirect auto loans (those arranged through a third party such as an auto dealer) fell 6 basis points to 1.78 percent of all accounts, well below their 15-year average of 2.18 percent. Delinquencies in direct auto loans (those arranged directly through a bank) fell 5 basis points to 1.07 percent of all accounts, remaining well under their 15-year average of 1.55 percent.
Chessen believes delinquencies will hover at very low levels for the foreseeable future as the economy continues to gain momentum and consumers remain financially disciplined.
“Tax reform has put more money in Americans’ paychecks, which makes it a little easier for them to meet their obligations each month,” Chessen said. “Consumers have done a remarkable job of managing their finances over the last several years, and we expect that will continue as the growing economy reinforces their financial footing.” (See Economic Charts.)
The fourth quarter composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
- Composite Ratio fell from 1.68 percent to 1.64 percent.
- Direct auto loan delinquencies fell from 1.12 percent to 1.07 percent.
- Indirect auto loan delinquencies fell from 1.84 percent to 1.78 percent.
- Home equity loan delinquencies fell from 2.42 percent to 2.28 percent.
- Marine loan delinquencies fell from 0.94 percent to 0.76 percent.
- Mobile home delinquencies fell from 4.97 percent to 4.48 percent.
- Personal loan delinquencies fell from 1.90 to 1.57 percent.
- Property improvement loan delinquencies fell from 1.08 percent to 1.04 percent.
- RV loan delinquencies fell from 0.96 percent to 0.73 percent.
In addition, ABA tracks three open-end loan categories:
- Bank card delinquencies fell from 2.62 percent to 2.46 percent.
- Home equity lines of credit delinquencies rose from 1.08 percent to 1.16 percent.
- Non-card revolving loan delinquencies rose from 1.57 percent to 1.62percent.
For borrowers having trouble paying down debts, ABA advises taking action — sooner rather than later — to solve debt problems. Proven tips are listed below. Additional consumer information on budgeting, saving, managing credit and more is available at ABA.com/Consumers.
- Talk with creditors – the sooner you talk to them, the more options you have;
- Don’t charge more purchases until your problems are solved;
- Avoid bankruptcy – it’s a short-term solution with long-term consequences; and
- Contact Consumer Credit Counseling Services at 1-800-388-2227.
Indirect auto loan: loan arranged through a third party such as an auto dealer.
Direct auto loan: loan arranged directly through a bank.
Delinquency: late payment that is 30 days or more overdue.
Bank card: a credit card provided by a bank.
Closed-end loan: a loan for a fixed amount of money with a fixed repayment period and regularly scheduled payments.
Open-end loan: a loan with a fixed amount of available credit but a balance that fluctuates depending on usage such as a line of credit.
Non-card revolving loan: an unsecured, open-end loan that is not linked to a credit card. Examples may include lines of credit for overdraft protection or check credit.
The American Bankers Association is the voice of the nation’s $17 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $13 trillion in deposits and extend nearly $10 trillion in loans.