TransUnion research indicates growth coming to some lending sectors and stability coming overall. Unsecured personal credit beckons both primary lenders and banks that buy loans for their portfolios.
Originations in auto loans, unsecured personal loans, and purchase mortgages will rise in 2025, in spite of continuing lender caution and the Federal Reserve’s leaning towards only one interest rate cut for the year, according to TransUnion. The credit bureau also forecasts that the slowdown in originations of bankcard accounts will decelerate, pointing to the possibility of a return to growth in new accounts in the future.
TransUnion makes these predictions on the basis of trends seen in the fourth quarter of 2024 and a reading of what consumers are thinking. It’s not a boom, but some potential improvement.
“The general consensus is that we’re looking at just one rate decrease this year,” says Michele Raneri, vice president and head of research at TransUnion. However, while that could ordinarily cause consumers to hold back from some credit applications, she thinks this effect will wear off. She sees signs of stabilization in the numbers.
People don’t like change, she explains, and they still remember how long rates were quite low — but she thinks they are going to get over that.
“As time moves on, people will forget how many yesterdays ago rates were lower,” says Raneri in an interview. “I think there may also be a certain amount of ‘anticipation fatigue.’ People will finally start buying houses again, because they don’t know how long it’s going to be before we get out of 6% and 7%, and they’re just going to decide to move anyway.”
Broadly, the company predicts the number of new purchase mortgages will rise by 13.3% in 2025. Unsecured personal loans will rise by 5.7%, and auto loans will increase by 2.7%.
Here’s how TransUnion parsed trends in each area, as well as in bankcards. Given current conditions, Raneri advises lenders to monitor their performance versus national trends more closely and frequently than used to be the case.
Bankcard Originations Fall in Fourth Quarter, but Not As Strongly
TransUnion sees cause for optimism for a “return to equilibrium” in the bankcard market. Originations of bank card accounts fell by 4.8% in the fourth quarter, compared to the fourth quarter of 2023. While this made the sixth straight down quarter for bankcard originations, it was the smallest rate of decline seen since the second quarter of 2023. (Card originations are reported one quarter in arrears to account for reporting lags.)
Digging into the overall numbers, the company’s analysis points out that originations among super prime consumers actually bucked the overall trend, with new accounts among these customers rising in the third quarter by 1.2% year over year.
Even though new account openings continued to fall, the total balances held on bank cards continued to grow in the fourth quarter. Total balances hit $1.11 trillion, an increase of 5.7% compared to the year earlier. Average bank card debt per borrower also continued to increase, rising to $6,580, up 3.4% over the year earlier and up 28% from the last quarter of 2021.
Overall balance growth came in even higher in another study, by the Federal Reserve Bank of New York, based on Equifax data. That research found that balances rose 7.3% year over year in the fourth quarter.
A bit of good news, which could loosen cautious lenders’ credit restrictions a bit, was seen in 90+ days past due delinquencies. The level fell by three basis points. TransUnion’s report noted that this is the first annual downtick since 2020.
Bankcard trends, Q4 2024
| Metric | Q4 2024 | Q4 2023 | Q4 2022 | Q4 2021 |
|---|---|---|---|---|
| Number of Credit Cards (Bankcards) | 561.5 million | 542.6 million | 518.4 million | 483.7 million |
| Borrower-Level Delinquency Rate (90+ DPD) | 2.56% | 2.59% | 2.26% | 1.48% |
| Total Credit Card Balances | $1.11 trillion | $1.05 trillion | $931 billion | $785 billion |
| Average Debt Per Borrower | $6,580 | $6,360 | $5,805 | $5,139 |
| Number of Consumers Carrying a Balance | 173.1 million | 169.9 million | 166.0 million | 159.0 million |
| Prior Quarter Originations* | 19.1 million | 20.1 million | 21.6 million | 19.8 million |
| Average New Account Credit Lines* | $5,702 | $5,673 | $5,226 | $4,468 |
Source: TransUnion
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
On a related note: Repayments on federal student loans began in October 2024, after a long moratorium. Raneri says that it could not be determined yet how those are performing because those loans are not reported as delinquent until they reach 90 days past due. She says any trend will not likely show up until later in 2025. This could have an effect on other forms of debt.
Unsecured Personal Loans Continue to Bounce Back
Originations of unsecured personal loans increased 15% in the third quarter of 2024 versus the same period in 2023, after a dip from the third quarter of 2022. For perspective: Originations of the loans in 2024 were up 3.5% compared to the level seen in 2022.
The 2024 year-over-year comparison made the third quarter in a row in which unsecured personal loans were up. TransUnion anticipates that this will be a growth area in the months ahead.
“All risk tiers contributed to this expansion, especially the super prime and the below prime tiers, which grew around 17% compared to the prior year,” according to the analysis.
Regarding delinquencies, personal lending saw a 33-basis-point fall, year over year, in loans 60+ days past due. The report indicates that improvement results from a continuing shift in the consumer risk groups receiving the loans. Superprime borrowers have been growing as a portion of personal loan recipients. In addition, the research found that delinquencies among subprime borrowers were down 136 basis points year over year.
Unsecured personal loan trends, Q4 2024
| Metric | Q4 2024 | Q4 2023 | Q4 2022 | Q4 2021 |
|---|---|---|---|---|
| Total Balances | $251 billion | $245 billion | $222 billion | $167 billion |
| Number of Unsecured Personal Loans | 29.6 million | 28.1 million | 27.0 million | 22.8 million |
| Number of Consumers with Unsecured Personal Loans | 24.5 million | 23.5 million | 22.5 million | 19.9 million |
| Borrower-Level Delinquency Rate (60+ DPD) | 3.57% | 3.90% | 4.14% | 3.00% |
| Average Debt Per Borrower | $11,607 | $11,773 | $11,116 | $9,622 |
| Average Account Balance | $8,496 | $8,704 | $8,195 | $7,328 |
| Prior Quarter Originations* | 5.8 million | 5.0 million | 5.6 million | 5.1 million |
Source: TransUnion
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Here’s a look into why unsecured personal loans are picking up, from a bank/fintech lender — with a twist on where the loans wind up:
LendingClub Corp., the parent of LendingClub Bank, specializes in unsecured personal loans for higher credit tiers. During the company’s fourth-quarter earnings briefing in late January, Scott Sanborn, CEO, said that the company’s consumer “members” are paying over $180 per month more for credit than they were a few years ago, due to higher interest rates and other factors.
Most of LendingClub’s personal loans help consumers consolidate existing debt, such as credit card balances, to bring down the interest rate. This addresses the higher costs, Sanborn said.
The company began as a fintech and later acquired Radius Bank. This enables it to fund its lending both through deposits as well as through its marketplace lending operation, its original format, in which investors buy loans it generates.
Sanborn said that in the fourth quarter, about a third of the company’s loan volume was being purchased by banks. He said that this was up from only 5% at the beginning of 2024 and that LendingClub anticipates that a strong level of demand from banks for these loans will be seen in 2025.
As the year closed, he added, private credit buyers represented the majority of investor demand for the loans. Sanborn expects this interest to grow in 2025 as well.
(Regarding the club concept, Sanborn noted in the briefing that 2025 will see some consideration of rebranding, reflecting the company’s widening activities.)
Super Prime Borrowers Help Boost Auto Loan Originations
Auto loan originations increased by 1.5% year over year in the third quarter of 2024. The analysis points out that this is nearly 15% below the level seen in the third quarter of 2019, before the pandemic. Yet, in current conditions, it represents growth. Much of this overall growth came from super-prime borrowers. Among that subset, originations were up 8.5% in the quarter compared to the year earlier. (Originations are reported one quarter in arrears.)
“This growth was likely driven in part by increasingly available new inventory and increases in incentives. Other risk tiers saw year-over-year declines in originations,” the analysis found. All risk tiers were down versus the 2019 period.
In terms of delinquencies, the report that delinquencies 60+ days past due continued to increase in the fourth quarter, rising to 1.67%, up from 1.61% in the year-earlier period. Delinquency levels on new vehicles were in line with pre-pandemic levels, while delinquencies on used vehicles were a mixed bag. On one hand, they showed a slight improvement over 2022 but were worse than the pre-pandemic period. The analysis sees most of the increase arising from below-prime risk tiers.
Auto loan trends, Q4 2024
| Metric | Q4 2024 | Q4 2023 | Q4 2022 | Q4 2021 |
|---|---|---|---|---|
| Total Auto Loan Accounts | 80.4 million | 80.4 million | 80.2 million | 81.4 million |
| Prior Quarter Originations1 | 6.4 million | 6.3 million | 6.5 million | 7.2 million |
| Average Monthly Payment NEW2 | $749 | $751 | $729 | $655 |
| Average Monthly Payment USED2 | $523 | $531 | $527 | $494 |
| Average Balance per Consumer | $24,373 | $23,945 | $22,998 | $21,298 |
| Average Amount Financed on New Auto Loans2 | $42,023 | $41,054 | $41,941 | $40,489 |
| Average Amount Financed on Used Auto Loans2 | $26,135 | $26,380 | $27,442 | $27,346 |
| Consumer-Level Delinquency Rate (60+ DPD) | 1.67% | 1.61% | 1.43% | 1.05% |
Source: TransUnion
1Note: Originations are viewed one quarter in arrears to account for reporting lag.
2Data from S&P Global MobilityAutoCreditInsight, Q4 2024 data only for months of October & November.
“Super prime was the underlying driver of auto originations growth in Q4 2024, and will likely continue in 2025,” the analysis says. “Affordability continues to be an issue for the used vehicle market and for below prime consumers.”
This situation will not likely change, it continues until there is a more reliable used vehicle inventory and lower interest rate levels.
Mortgage Lending Pickup Favors Purchase Originations
TransUnion’s study found that mortgage originations were up 7% in the third quarter of 2024 versus the year earlier. The firm says this makes the third consecutive quarter where originations either grew or were flat. Four out of five originations in the quarter were for purchase mortgages, rather than refinancings. By contrast, in the five years before the pandemic,68% of originations were for purchases. (Originations are reported one quarter in arrears.)
One wrinkle: Some recent mortgage borrowers took advantage of falling rates and refinanced.
In spite of this recent growth, originations continue to be down by historical standards, according to the analysis. It continues: “Recent Federal Reserve indications that interest rate reductions may occur more slowly may result in decelerated growth in 2025. Year-over-year increases in delinquency continue to be worth monitoring closely. Yet, even despite a relatively steady series of year-over-year increases in recent quarters, the rate remains extremely low relative to historical standards.”
Also, a warning: Homeowners’ non-mortgage debt keeps growing. It was up 7% year over year in the third quarter.
Source: The Financial Brand
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