The way in which consumers were able to borrow on many lines of credit changed slightly, but mostly for the better, during the second quarter of this year.
Improving credit quality and a slight uptick in demand for many kinds of financing led banks to broaden lending standards for consumer financing between April and June, according to the latest Senior Loan Officer Opinion Survey on Bank Lending Practices issued quarterly by the Federal Reserve Board. Perhaps the most significant of these changes was reflected in auto loans, which have routinely seen growing demand and better repayment rates for some time.
In all, 13 of the 57 banks surveyed (22.9 percent) said they broadened their credit qualifications during the second quarter, with 12 (21.1 percent) saying they eased somewhat, and one (1.8 percent) saying they eased considerably, the report said. The other 44 percent said their standards remained unchanged.
Meanwhile, credit card lending was less notable in its improvements, but still saw a slight uptick in looser standards, the report said. Five of the 46 banks surveyed (10.9 percent) said credit qualifications eased somewhat, but all of those were considered large banks. That improvement accounted for 19.2 percent of financial institutions of that size surveyed.
At the same time, banks large and small generally expressed a greater willingness to extend more installment loans to consumers, the report said. Altogether, 14 of 60 (23.3 percent) said they were somewhat more willing to extend this type of credit to consumers than they were three months prior, while 45 (75 percent) said their desire to do so was unchanged. The only one (1.7 percent) that tightened restrictions said it was much less willing to extend this type of credit.
Consumer credit has been improving appreciably since the end of the recession and, in the last year in particular, delinquencies and defaults across nearly all loan types have improved considerably. Now, consumers seem to be managing their credit cards and other loans more responsibly than they were in the past, and that has been a boon to both them and lenders. However, experts believe that instances of delinquency and default will have to logically rise again in the near future, back to historical norms.
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