As more and more consumers turn to personal loans and other loan products to support them throughout the Covid-19 pandemic, new trends are developing in the industry. Understanding how to help borrowers helps lenders meet consumer needs and stay competitive in the loan market. For the savvy credit professional, here are six consumer credit trends defining the industry in 2021.
Fewer auto loans
Like so many car manufacturers difficulty accessing computer chips for their new vehicles, the need for auto loans has decreased. Unfortunately, this trend has been accompanied by another: fewer borrowers making regular car loan repayments.
Auto loans remain a beneficial program for lenders, but to increase consumer finance, many lenders offer used car finance deals as well as new ones. Consumers who have maintained strong credit ratings can take advantage of 0% interest rates on new vehicles and other attractive offers from automakers and domestic lenders.
Turn to credit management software
The pandemic is still going strong, making 2021 a year spent online. With SaaS loan management software From providers like LoanPro, lenders can stay in touch with their borrowers without the need for face-to-face meetings.
Loan management software automates management and collections, allowing lenders to spend more time on valuable leads. Considering the reduced labor costs and ease of access for consumers, it’s easy to see why many industry professionals are turning to software.
Find low risk borrowers
The COVID-19 pandemic has been accompanied by a recession, which means many lenders have seen defaults increase from 2020 and continue into this year. Lenders attract low-risk borrowers by offering interest rate on credit cards or other indefinite loan products to move business forward.
The most notable defaults were on home equity loans and home improvement loans. Experts predict these delinquency rates will continue, but lenders are working to recoup their losses by seeking out low-risk borrowers, especially those who buy new cars with auto loans.
To facilitate loan programs for qualified buyers, lenders are turning to online application forms. These forms immediately reject unqualified buyers and offer qualified buyers a quick way to take out new loans with minimal effort. In the lending industry, 2021 looks like the year of the risk-averse bear.
Opening backup credit cards
Consumers with good credit continue to apply for and receive credit cards. Departures are on the rise, but consumers are not using their new cards. Balances remain low as many borrowers are reluctant to spend in a volatile economy. But, as the the labor market continues to rebound, lenders expect consumers to start charging big-ticket items again.
Wait for a recovery in 2021
Before the pandemic, lenders were seeing record highs from borrowers. As the schedule moves forward to 2021, lenders expect borrowers to revert to pre-pandemic borrowing. Lenders also expect abstentions to continue, but not to record levels. Although the delta variant introduces some uncertainty into these forecasts, many industry experts remain bullish.
Offer new products to the loan market
Lenders who want to increase their bottom line find success with new products. Offering savings and loan products through atypical institutions represents an important change for the market. For example, some lenders offer loans to Amazon merchants who have difficulty obtaining loans from traditional banks.
Online financial institutions are also getting creative in their offerings. Rather than paying for brick and mortar buildings, they are paying benefits to their customers online. With online savings accounts and no-charge personal loans, consumers are finding ways to save money on banking products from alternative financial institutions.
The COVID-19 pandemic has changed the economy, but lenders shouldn’t worry any longer as the job market continues to grow. Successful leaders find new ways to attract low-risk borrowers by offering affordable interest rates and unique credit products.