There Has Been a Dramatic Increase in Loan Payment Impairments Due to COVID-19 Pandemic but Platforms are Helping Consumers

The fact that the COVID-19 pandemic has impacted the consumer lending market should come as no surprise to anyone. As the jobless rate has jumped, borrowers are having to make difficult decisions as their income has tanked. Now we have some solid data provided by dv01, a Fintech that connects directly with the largest online lenders in the consumer world.

According to dv01, the total percentage of payment impaired loans shows a dramatic increase in payment impairment since March 18th – aligning to the rise of the Coronavirus.

To quote the report:

“[the] Total Payment Impairment % has increased by approximately 5.5-6% above its historical average. For comparison, estimates of US unemployment rates related to COVID-19 vary. As of April 4th (five days before our data cutoff) 16.8 million Americans [had] filed for unemployment aid over the past three weeks versus an average of 0.65 million over any three- week period since 2019. That indicates that about 10% of the total labor force (approximately 164 million) [had] filed a claim. Although initial claims do not all translate to unemployment, and official unemployment rates are not yet known, forecasts project the rate to be well above 10% for April—a greater than 6.5% increase from February’s rate of 3.5%.”

Delinquencies have risen but the report also indicates that total delinquencies have decreased as a result of more loans receiving modifications. This means that Fintech platforms are quickly making adjustments for borrowers.

There is a surge in loan modifications resulting from programs put in place to help borrowers mitigate economic hardships,” reports dv01.

Loan issuers have “successfully enrolled more borrowers into their hardship relief modification programs,” thus assisting consumers struggling to make payments. Additionally, issuers have been able to reach borrowers before their loans are past due and enabling the modifications. The most widely used modifications are extensions, loan forbearance, or simply skipping a payment. By modifying loans, consumers’ credit ratings may not be negatively impacted – an important benefit to borrowers.

The report notes that certain geographic regions, such as those with more wide-ranging quarantine efforts, above-average exposure to tourism, and oil-dependent regions show higher Payment Impairment %  than the remainder of the country.


wing the most significant impact of the COVID-19 crisis.

dvo1 states that the mitigation efforts from marketplace lenders have led to a “substantial shift away from delinquency and into loan modifications for borrowers facing hardships.” Borrowers are receiving crucial support during this time of hardship.

Of course, loan modifications will not last forever but at least lenders are cognizant of the programs being put into place to support impacted individuals. dv01 says that over time it will become more clear if the combination of government programs and platform modifications are sufficient to manage the problem – before people get back to work.





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