TransUnion forecasts originations to non-prime borrowers will continue to rise for many credit products in 2022
TransUnion’s financial services forecast explores future credit trends for auto, credit card, mortgage and personal loans
CHICAGO, IL (December 15, 2021) — Continued expansion of lending, including to non-prime consumers, is expected to occur in 2022 with origination levels reaching or surpassing pre-pandemic levels, according to the newly released TransUnion (NYSE: TRU) Financial Services 2022 Consumer Credit Forecast. For auto loans and personal loans, consumers who are generally higher risk are accounting for a growing share of origination volume, with the forecast providing insights that explain why such broader lending will benefit the overall consumer credit market.
TransUnion’s forecast found that the auto, credit card and personal loan markets are expected to continue expanding into the non-prime segment of the market (comprised of the subprime and near prime risk tiers) as financial institutions recalibrate their growth strategies. This expansion is happening as serious delinquency rates remain well below pre-pandemic levels.
“During the height of the pandemic, many lenders pulled back and tightened underwriting to hedge risk in a period of great uncertainty,” said Charlie Wise, head of global research and consulting at TransUnion. “Consumer performance, however, has continued to stay strong, which has restored lender confidence. The economy is normalizing and continues to expand, and those signs of renewed strength are encouraging lenders to not just focus on the least risky consumers, but to provide greater access to those persons that may be viewed as higher credit risks.”
Changes in non-prime originations are expected to impact many credit industries. For example:
- Originations for personal loans are expected to continue rising in 2022 – marking seven straight quarterly increases. Originations to both non-prime and prime and above consumers are expected to grow in 2022 and resemble pre-pandemic origination volumes – levels last seen in 2019.
- Auto loan originations are expected to rise from a projected 28.3 million in 2021 to 28.9 million in 2022 – well above the 26.8 million originations observed in 2020. Non-prime originations are forecast to rise from 9.4 million in 2021 to 10.0 million in 2022, representing a higher share of all auto loans.
- While credit card origination growth to non-prime borrowers will slow from 29.2 million in 2021 to 28.8 million in 2022, the number of loans issued to this group of consumers remains well above 2020 (20.4 million) and 2019 levels (26.3 million). The share of accounts to non-prime borrowers are forecast to be 41% in 2022 – near 2021 levels (42%) – and above the pre-pandemic levels of 38% in 2019.
Origination Levels Over the Years
| Credit Product |
2022* |
2021** |
2020 |
2019 |
| Auto |
28.9 million |
28.3 million |
26.8 million |
28.4 million |
| Credit Card |
67.8 million |
69.8 million |
51.9 million |
69.3 million |
| Personal Loans |
20.0 million |
17.9 million |
14.2 million |
18.8 million |
*TransUnion’s forecast includes Q1, Q2, Q3 and Q4 of 2022
**TransUnion’s forecast includes Q3 and Q4 of 2021
“The consumer landscape is starting to more closely resemble the pre-pandemic era. With forbearance programs expiring and stimulus funds drying up, demand for credit is growing and consumers are reevaluating their credit needs – which is a sign of a humming and functioning economy. The year 2022 will mark a continued return to lending in the credit market, which will help fuel the continued resurgence in consumer spending,” added Wise.
TransUnion’s forecasts are based on various economic assumptions, such as gross domestic product, home prices, personal disposable income and unemployment rates. The forecasts could change if there are unanticipated shocks to the economy, such as if the omicron COVID-19 variant disrupts recovery efforts, home prices unexpectedly fall or inflation continues to remain elevated through the next year. Better-than-expected improvements in the economy, such as potential increases in GDP and disposable income, could also impact these forecasts.
For more information about the 2022 TransUnion forecast and to register for a webinar providing detailed projections, please click here.
Trend 1: Card Balances Will Grow as Consumer Spending Ramps Back Up
Instant Analysis
Credit card balances are expected to continue an upward trend in 2022, following robust bankcard origination growth in 2021 (a record-breaking 19.3 million originations occurred in Q2 2021). This growth is expected to fuel the continued recovery of consumer spending through the summer and into the start of the holiday shopping season. In Q1 2022, balances are expected to show as much as 10% YOY growth and then stabilize – with spending levels remaining below pre-pandemic levels. By Q4 2022 total balances are expected to reach $805.7 billion, the highest level since the start of the pandemic and a nearly 3% YOY increase. As more consumers apply for credit and increase their spending, delinquencies are expected to tick up to 1.74% by year end, while still remaining at a healthy level and below pre-pandemic rates.
“While consumer spend is expected to grow, we do not expect balances to reach the same levels exhibited in 2019. There is still quite a bit of consumer liquidity in the market which may be slowing balance growth. Once we see a return to bigger card-focused purchases – such as travel and entertainment expenses, especially international travel – we can anticipate a more significant increase to card balances. We expect consumer bankcard delinquency to continue to rise as a result of a return to traditional seasonal patterns.”
– Paul Siegfried, senior vice president and credit card business leader at TransUnion
Trend 2: Personal Loans Will Strongly Rebound in 2022
Instant Analysis
With consumer spending expected to increase in 2022, TransUnion’s forecast projects this may lead to a continued rebound in the consumer lending market, especially as consumers resume seeking unsecured personal loans to consolidate growing card balances. Personal loan originations are expected to grow 11% among non-prime consumers in 2022 and 14% with prime and above consumers. This annual growth is driven by significant YOY growth in Q1 (Q1 2021 originations had not yet recovered) and more modest growth through the rest of the year. Delinquencies are expected to increase slightly throughout 2022.
“During the onset of the pandemic in 2020 many personal loan lenders pulled back dramatically on originations. This market took time to recover through early 2021 as consumers were flush with cash after stimulus checks and lower spending. With lenders eager to grow, we expect the robust originations that we saw beginning in Q2 of 2021 to continue through 2022. This growth will be boosted by an eventual return of demand for credit card consolidation loans as card balances grow.”
– Liz Pagel, senior vice president and consumer lending business leader at TransUnion
Trend 3: Vehicle Inventory to Impact Auto Market Sales
Instant Analysis
The inventory challenge is likely to be the single greatest factor that will impact vehicle sales in the auto industry next year. In terms of growth, the majority of new auto loans in the non-prime segment are expected to come from the subprime risk tier. While overall growth will remain muted, consumer delinquency rates are also expected to remain at healthy levels throughout 2022.
“Overall, auto originations are expected to remain flat as vehicle supply shortages challenge sales growth. However consumer demand for vehicles has not waned, and as we see inventory increase, this will likely influence origination growth. Lenders are also eager to return to lending and will expand into the non-prime segment of the market to meet consumer demand – especially as consumer performance has remained strong.”
– Satyan Merchant, senior vice president and auto business leader at TransUnion
Trend 4: Available Home Equity on the Rise for Homeowners
Instant Analysis
The home price appreciation that has occurred in 2021 has positioned homeowners to have increased equity in their homes with the median available home equity per consumer at $123,747 as of Q3 2021. This home equity is expected to significantly exceed the balances of non-mortgage debt which is at $10,151 per consumer. This offers homeowners a means of reducing outstanding non-mortgage debt through a home equity line of credit (HELOC) or tapping into their home equity. The home price index (HPI) is projected to grow throughout next year and by Q4 2022, the median available home equity per consumer is expected to reach as much as $129,528 – a 5% YOY increase. Despite the increase of refinances in 2021 due to low interest rates, more than 20 million consumers are still expected to benefit from a Rate and Term refinance in the new year.
“Following the surge of mortgage origination activity we saw in 2021 from both new home purchases as well as refinancing, homeowners will be well positioned going into 2022. Home prices are expected to continue their upward trajectory which will enable homeowners to build more equity. That helps open the door to forms of financing that allow homeowners to tap into that equity such as a HELOC and to reduce other outstanding debts.”
– Joe Mellman, senior vice president and mortgage business leader at TransUnion
For more information about the 2022 TransUnion forecast and to register for a webinar providing detailed projections, please click here.
About TransUnion
TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.
