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US Consumer Lending in 2017

The beginning of the year is not just a whole series of holidays but also the right time to sum up the results of 2017 and try to predict what to expect in 2018.

Last year was quite a good one for the US consumer lending. In fact, it was a very good year, which worthily continued the 5-year long trend.

According to the most recent data, US consumer lending in December 2017 amounted to $27.95 billion vs the expected $19 billion and $20.53 billion in November 2017. This is the most significant monthly increase since December 2010, when US consumer lending totaled a whopping $118.60 billion.

At the same time, consumer spending shows no sign of slowing. US retail sales in December jumped another 0.4% m/m with decent upward revisions to the history, as rising household incomes, soaring confidence and a growing appetite for consumer debt fueled spending growth. Three-month annualized retail sales growth remains in double digits (11.3%)

Currently the US economy is experiencing a moderate and stable growth in the most areas of consumer lending. It is based on GDP growth, almost full employment, personal income rises and high degree of consumer confidence. In these conditions, should consider expanding their portfolios and regular client base.

Now as US economy gains steam, labor market is tightening up and almost reaches the full employment, consumer lending gets additional support across almost all areas.

In these conditions, creditors may considerably expand their portfolios and client base.

Car loans are one of the most promising lines in the US consumer lending market.

It is simple to explain – rising economy and low jobless rate support a good credit rating of the potential borrowers. Although the oil prices are currently higher amid agreements with OPEC, but public opinion shows that OPEC doesn’t welcome too high prices, in particular above $60 per barrel. Strong house market also supports consumer lending in the States.

Car loans are one of the most promising lines of US consumer lending market.

It’s obvious really. Rising economy and falling joblessness rates support credit rating of the potential borrowers as lower gas prices motivate people to buy cars. Strong homes market also supports consumer lending in the States.

The growth of personal loans has slowed somewhat. Still, 10.8% rise in 2017 is rather a good result. It is not an easy task to beat 2014 and 2016 results (26.4% and 26.2% respectively).

The main reasons of the slowdown are the aggressive development of fundraising, defaults due to higher rates of such large companies as SoFi, Prosper, and Avant, and the market exit of one of the founders of the consumer lending business CircleBack Lending Inc. along with the CFO resignation of the biggest market rep – LendingClub.

Also interesting is the shift in the distribution of the shares of the consumer lending market between traditional financial institutions and financial technologies (Fintech).

The nascent financial technology industry has seen rapid growth over the last few years. In 2010 Fintech borrowers constituted only 3% versus almost a third of the market occupied by traditional financial institutions, such as banks, credit unions, and other institutions. In 2015 Fintech borrowers market share reached 30%. In 2017, there were more than 200 Fintech-companies for lending available in the US.

To complete the picture, we may point out that according to TransUnion data, borrower-level delinquency rates for auto loans and credit cards raised somewhat but eased very significantly for mortgage and personal loans.

It is also useful to know that in the US, Alaska has the lowest percent of overdue loans (0.16%), and Georgia has the highest (0.77%).

And now the most interesting. According to the recent estimates, consumer lending in the US will keep its triumphal rise for the rest of 2018 due to the combination of strong growth, higher rates, balanced situation with the delinquency rates, and easy access to the loans.

Moreover, in the following 2 years, the US consumer lending market is expected to rise at an even faster pace and some moderation expected only in 2019-2020.

Global investment in financial technology increased more than twelvefold from $930 million in 2008 to more than $12 billion in 2014, and according to Morgan Stanley will reach $290 billion. in 2020.

So, US consumer lending market now is not just the good way to invest your money, but also a rare chance to take off the cream of the expansion which has just started.

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