Covid-19 In The Wallet: Nearly 25 Percent Of All Loans, Credit Cards And Mortgages Are In Financial Hardship Programs

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Written by Ann Brown
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Covid-19 in the wallet: Nearly 25 percent of all loans, credit cards, and mortgages are in financial hardship programs, according to the latest data. Photo: Unsplash

The covid-19 pandemic is hitting everyone hard in the wallet. Individuals, the government, and companies are feeling the economic pinch.

Those who are unemployed have been unable to pay their bills; many have opted into financial hardship programs companies are offering during the pandemic. More than  7 percent of auto and personal loans are in some type of financial hardship program as of June, while 6.79 percent of mortgages and 3.57 percent of credit card accounts are in some kind of payment relief, CNBC reported.

According to TransUnion, which defines financial hardship plans as a deferred payment, forbearance program, frozen account or frozen past due payment, overall, 4.64 percent of all auto, bankcard, mortgage and unsecured personal loans accounts were in a hardship plan in June.

Lenders had nearly 15 million credit cards in “financial hardship” programs in April, such as deferral programs that let borrowers temporarily stop making payments, The Wall Street Journal reported. That comprises about 3 percent of the credit-card accounts the company tracks.

In all, nearly 25 percent of loans, credit cards, and mortgages are in financial hardship programs.

“This pandemic is really like nothing we’ve ever seen,” Matt Komos, vice president of research and consulting at TransUnion, says, especially in regard to the rate at which the economy changed and unemployment exploded. Because of the widespread uncertainty, some consumers may have signed up for hardship programs quickly, almost as a matter of protection, Komos says. But now that they have more clarity on their situation, they can start to come off these programs. 

TransUnion’s data looks at the number of accounts that are currently in a financial hardship program, not the number of people. It is important to note that some consumers are in payment relief plans for multiple products, Komos said.

Delinquency rates on auto loans and personal loans increased just slightly from last year. Interestingly, mortgages and credit card rates actually saw decreases in delinquencies year over year, according to TransUnion’s research. “The good news is many consumers that need the help are getting it and lenders have been willing to provide that help,” Komos says. 

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“We are early in this pandemic,” Komos says. “The actions lenders have taken, and that consumers have had the opportunity to take advantage of, have kept delinquency in check and have still maintained an overall healthy credit market, at least as of right now.”

But as Washington continues to debate additional stimulus checks and/or extensions of the $600 weekly unemployment benefits, things aren’t boding well for the wallet or loans.