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New study: American consumers can expect greater access to credit in 2021

New study: American consumers can expect greater access to credit in 2021
(Image credit: Getty)

Americans are set to enjoy greater access to credit in 2021 as providers ease open the lending taps that have tightened amid the coronavirus pandemic. According to Transunion’s annual consumer credit forecast, the significant drop off in lending resulting from COVID-19 disruption in the second quarter of 2020 will rebound strongly in Q2 2021, with originations of personal loans online (opens in new tab) and credit cards both predicted to return to pre-pandemic levels. 

“The re-opening of America and the expected addition of more jobs and increased wages will make the greatest impact in how consumers are able to manage their debts in 2021,” said (opens in new tab) Matt Komos, vice president of research and consulting at TransUnion. “We are forecasting robust origination activity, and barring any unforeseen shocks to the economy, we anticipate this growth will commence at the beginning of the second quarter of 2021 for most credit products.”

Good news for borrowers

The prediction is good news for consumers who anticipate needing access to credit in the near future. It also gives those planning a significant purchase, perhaps buying a car using any of the best auto loans (opens in new tab), or who simply need a low rate personal loan, plenty of time to check their credit rating and polish it if necessary, using credit repair services (opens in new tab).  

While interest rates on credit products such as mortgages have either been at or near to record lows since the coronavirus took hold, lenders have been exercising greater caution over who they’ve been willing to lend to. Conscious of the rising threat to jobs and wider economic uncertainty, loan companies and mortgage lenders (opens in new tab) have tightened their lending criteria to reflect the heightened risk of borrowers being unable to meet their repayments. 

Now, however, with the coronavirus vaccine stoking optimism over economic prospects for 2021, the path is clearing for such restrictions to be relaxed. 

New study: American consumers can expect greater access to credit in 2021

(Image credit: Shutterstock)

How fast will credit access return?

Despite the brighter outlook, Transunion says how quickly the credit market rebounds will be heavily influenced by mortgage borrowers, and particularly those who will start the year still in programs introduced to prevent evictions during the health crisis. Current discussions in Congress around the future of such programs, and the delivery of a stimulus check 2 (opens in new tab), could therefore also be an important determining factor too.

“Serious consumer delinquency rates have remained low in 2020 primarily because of the accommodation programs provided to consumers at the onset of the COVID-19 pandemic,” points out Komos. “However, we believe those consumers with accounts still in mortgage forbearance also may be the ones who will find it most difficult to make their monthly payments once accommodation programs end. 

“A lot of external factors could influence their payment behaviors, including additional stimulus, the widespread release of vaccines and the pace of economic recovery, though timing could play a major role in the impact to consumer credit. At this time, our 2021 projections point to a year that will be more reminiscent of 2019 than the COVID-19-impacted consumer credit market of 2020.”

With over 20 years’ experience in the financial services industry, Tim has spent most of his career working for a financial data firm, where he was Online Editor of the consumer-facing Moneyfacts site, and regularly penned articles for the financial advice publication Investment Life and Pensions Moneyfacts. As a result, he has an excellent knowledge of almost areas of personal finance and, in particular, the retirement, investment, protection, mortgage and savings sectors.