Data Firm Finds Online Loans Holding Up Better Than Expected

In a newly-released report, the data firm dv01 found that the percentage of online loan borrowers who made their regularly scheduled loan payments continued to rise in August, despite the lingering and wide-ranging economic impacts of the coronavirus pandemic coupled with the lapsing of emergency aid. The report looked at the performance of more than 2.3 million loans from across the online lending industry in the United States.

“The unemployment benefit did subside, and there was no material drop-off in loan performance at all,” said Vadim Verkhoglyad, a data analyst at the firm, as reported by American Banker.

Prior to the pandemic, 5 to 6 percent of borrowers were failing to make their regularly scheduled payments. In May, that percentage rose to 16.5 percent as borrowers requested forbearance, but it had decreased to 8.9 percent in August.

The current data suggests a better outcome than most thought. Most U.S. consumers are deleveraging rather than increasing borrowing to maintain consumption, said Todd Baker, a senior fellow at Columbia University’s Richman Center for Business, Law and Public Policy.

Throughout the pandemic, consumer spending has  declined considerably, which has likely helped borrowers make their regularly scheduled payments. The U.S. personal savings rate has been more than 15 percent since April 2020, the first time it had been that high since the 1970s.

The report also shows that more borrowers have been paying off online loan balances early, likely because fear has made many consumers more frugal, Verkhoglyad suggested.

The report has also caused many firms to reconsider the previous notion that the online lending industry was insecure and could not withstand a long stretch of high unemployment.

“It’s weathering kind of in line with, or better than, our expectations,” said Anuj Nayar, LendingClub financial health officer.