Online loans See Impairments lower than expected
Unsecured personal loans issued by online lenders like Best egg, Loan Club and Reached have long been considered particularly vulnerable during downturns.
Corn new numbers from data processing company dvo1 point to a surprising resilience of market lending, a category of lending widely considered to be high risk.
After peaking at 16.5% in April as the coronavirus lockdown took hold, the market loan depreciation rate – which measures the frequency of borrowers falling behind or entering forbearance agreements with lenders – fell to 9.7%.
Particularly impressive was the fact that the drop occurred even with the expiration of expanded unemployment benefits of $ 600 per week in late July amid a deadlock in Congress over a new coronavirus relief program.
Initial jobless claims stood at 1.2 million as of August 6, five times the historical average.
“Despite the high number of jobless claims and the lack of additional unemployment stimulus, the performance of online lending remains stronger than it has been historically and is continuing its upward trajectory,” the report notes on the COVID-19 performance of dvo1.
Nor is this a case where loan payments for August just haven’t come due yet. With payments for these online loans typically due early in the month, more than 50% of borrowers had already paid by August at the time of the report’s release, New York-based dvo1 noted.
Loan changes, after skyrocketing when COVID-19 hit the United States this spring, also declined significantly, falling to about 5% of their pace in March.
Overall, 70% of all borrowers who got loan modifications from lenders after the COVID-19 hit have started paying again.
In June, more than 100 million payments were skipped by consumers on a range of loans, including student and auto loans, a number that tripled from April.
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