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Loan Delinquencies Fall to Lowest Points Since Recession

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The rate at which Americans fell behind on their outstanding loan balances for the first time continues to improve, and now stands at levels not seen since the start of the recent economic downturn.

Delinquency on nearly all types of consumer credit continued to improve in the first three months of the year, driven largely by falling late payments for personal loans and credit cards, according to the latest Consumer Credit Delinquency Bulletin, issued quarterly by the American Bankers Association. The composite for all consumer loan delinquency dropped to just 2.35 percent of all accounts, which was the lowest level seen since 2007, and now stands below the 15-year average of 2.4 percent.

Leading the way in improvements were personal loan delinquencies, which dipped to just 2.01 percent of all outstanding balances, declining from 2.87 percent, the report said. This was the largest quarter-over-quarter improvement seen in any loan type in terms of points. At the same time, credit card delinquencies slipped to 3.08 percent of all balances, down from 3.17 percent. That was the lowest total seen in any quarter since 2001, and now stands considerably below the average of the past 15 years of 3.93 percent.

However, ABA analysts are now cautioning that the improvements seen during the past year aren’t likely to be sustainable in the future. Many experts have long cautioned that there must at some point be a bottoming out of loan delinquency and default, and that may come in the next few months.

“We’ve moved back to historical norms now and further improvement could be hard to achieve,” said ABA chief economist James Chessen. “The economy has slowed recently and uncertainty remains high. This means banks will continue their prudent approach to extending new consumer credit as high unemployment levels are still creating loan losses. However, continued growth in jobs, moderating gas prices, and steady growth in personal income all will help consumers build a strong financial base.”

During the recession, millions of consumers faced significant financial hardships that made it difficult for them to meet all their loan obligations, and as such, many are now concentrating on making sure all of their bills are paid on time and in full.

Image: 401K 2012, via Flickr

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