Personal Loan Delinquencies Jump in Nov., Presaging Holiday ‘Hangover’

Americans ended 2023 dealing with increasing financial strain, relying more on personal loans.

That’s according to a recent report by VantageScore, which warns that increased dependence on these loans and other higher-interest credit products could make it harder for consumers to pay their bills in the months ahead.

“There is a growing concern that some consumers’ holiday spending is adding unsustainable levels of credit card and personal loan debt,” Susan Fahy, executive vice president and chief digital officer at VantageScore, said in a news release. “Consumers need to be vigilant when managing their debt obligations heading into 2024.”

The report, which monitored consumer spending and debt in November, found that delinquencies for the month remained elevated from the same month the prior year for all loan categories. In addition, late payments increased across all consumer groups, except those in the “superprime” group (those with credit scores between 781 and 850).

Meanwhile, VantageScore found that month-over-month “early-stage delinquencies spiked .12% from .87% to .99%, which was the second time this year that delinquencies in this category surpassed pre-pandemic levels,” the release said. 

The findings follow a year that, as PYMNTS wrote late last month, “served as a pivotal marker in reshaping consumer financial behavior,” as the burden of paycheck-to-paycheck living led people to rethink their spending habits and financial priorities.

“As we venture into the new year, the lessons learned from this period of economic strain are poised to redefine how individuals approach their finances,” the report said. “A heightened awareness of the impact of emergency expenses on savings and the recognition of nonessential spending as a contributor to financial pressure will likely prompt a shift in consumer behavior.”

Among those shifts is a move by consumers to avoid credit cards altogether, according to “New Reality Check: The Paycheck-to-Paycheck Report — The Credit Card Use Deep Dive Edition,” a PYMNTS Intelligence/Lending Club collaboration.

Worries about accumulating debt and preventing overspending are the main reasons cited by consumers who chose not to own credit cards.

“Specifically, 51% expressed a desire to avoid accumulating debt, while 32% identified this as their primary reason for not owning a credit card. Interestingly, only 26% mentioned not qualifying for a credit card as a deterrent,” PYMNTS wrote.