18 million US credit cards, missed auto loan payments in April
- The proportion of credit card accounts entering “financial hardship” programs jumped 3.2% in April, to 14.7 million accounts, according to credit bureau TransUnion mentionned Wednesday.
- Auto loans recorded a similar increase, with 3.5%, or nearly three million accounts, falling into a precarious situation.
- The government’s $ 2 trillion stimulus bill has created options for Americans in debt, but “banks and lenders seek new regulatory guidance” as tax aid dries up, TransUnion said.
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Millions of Americans struggle to repay debts as the economic fallout from coronavirus spreads further.
The share of credit card accounts entering “financial hardship” status reached 3.2 percent, or 14.7 million accounts, in April, according to a new report. report from the credit bureau TransUnion. The proportion increased in April, from just 0.01% in March 2020 and 0.03% a year ago.
Auto loans saw a similar drop in hardship, with 3.5%, or nearly three million accounts, unable to cover monthly payments last month.
About 2.7 million mortgages, or 5% of those loans, are currently in financial difficulty, TransUnion said. Home loan delinquencies are down from a year ago, although the use of forbearance programs may delay a small increase in defaults.
Aid programs, including forbearance and deferral plans, allow borrowers to delay certain payments and prioritize which debts need to be repaid first. The government’s $ 2 trillion stimulus bill has opened options for those struggling with credit products, but Congress will likely need to act more, said Matt Komos, vice president of research and consulting at TransUnion.
“While these programs offer consumers temporary relief, banks and lenders are seeking new regulatory guidance on the next steps to be taken once the stimulus packages have dried up,” he said in the report. Wednesday.
While the coronavirus pandemic first emerged as a supply chain problem for global producers, it quickly became the biggest economic threat in nearly a century. Soaring unemployment has left more Americans less able to make monthly interest payments, and a growing trend in borrowing that has lasted for years is going to make the problem worse.
Average credit card debt per borrower reached $ 5,653 in the first quarter, up nearly $ 100 from the previous year, according to TransUnion. Default rates and the gross number of credit cards have also jumped since the first quarter of 2019.
Borrowers are not without help. Several lenders have offered free loan and credit card forbearance options following the outbreak in the United States. Yet the short-term solution puts pressure on lenders and risks a wave of defaults once deadlines are reset.