Millions of auto loan payments deferred during COVID shutdowns; Most landed on their feet

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Millions of borrowers took advantage of pandemic-inspired “financial hardship” offers from auto lenders last year to defer payments on their auto loans, a move that turned out to be less risky than it seems. , according to credit bureau research TransUnion.

The vast majority of these accounts stay up to date and paid up to date – a sign that the economic impact on auto loans was not as great as lenders had feared.

“When the pandemic started, there was so much unknown,” said Matt Komos, vice president of research and consulting at Chicago-based TransUnion. “It served as a protective barrier at an unknown time. “

For example, Allied financial Inc., a major auto lender, separately reported that participation in COVID-19 assistance peaked at around 30% of its consumer auto accounts, or 1.3 million accounts as of May 2020.

About 99% of those had expired by September 30, 2020, the bank said. About 89% were up to date or paid in full; 8% were delinquent or charged, and only 3% had extended their participation.

TransUnion research found that 70% of consumers with subprime credits and 80% of high risk consumers made payments to difficult accounts while enrolled in such programs. In addition, over 40% of the accounts for these programs were closed within the first three months of opening.

TransUnion said nationally, the percentage of auto loan accounts in “financial difficulty” was 7.04% of the total in May 2020, compared to just 0.64% in March 2020.

As of May 2021, the percentage of financial distress remains high, at 2.09%, but it’s a fraction of what it was a year ago, and it’s likely to drop further, Komos said in a statement. telephone interview.

“Those numbers should continue to drop… to pre-pandemic levels, I guess that’s what he would typically reach,” he said.

“Although the overall economic recovery has been quite strong, there are still pockets where unemployment is even higher, consumers still struggle to find jobs. Or maybe they work on time and haven’t returned to their previous hours, ”Komos said.

Meanwhile, many other consumers who participated in the financial hardship offers left the program and did not return, he said.

This implies that many borrowers who took advantage of the opportunity to defer their payments did not really need it, out of economic necessity.

Komos said it was 20-20 in hindsight. “There was a subset of consumers who didn’t totally ‘need’ it,” he said. “But they were doing it from a cautious standpoint.”

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