Americans have taken full advantage of loan forbearance programs during pandemic

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TransUnion reports renters, in particular, have used them to manage their finances

Americans have taken full advantage of loan forbearance and payment deferment programs enacted at the beginning of the coronavirus (COVID-19) shutdown, a report from credit reporting agency Transunion shows.

Contained in the original CARES ACT, these programs allow consumers to skip payments on a wide range of debt, from student loans to mortgages. 

Enrollment in these programs increased by 25 percent in March and April as a nationwide lockdown threw tens of millions of people out of work. These “acute relief” programs were designed to help people gain financial stability while maintaining good credit standing.

Giving renters a leg-up

The TransUnion analysis also found that renters, in particular, are being prudent with new credit borrowing and are not taking on new forms of debt in response to COVID-19. The percentage of renters opening new credit accounts since the start of the year fell 37.8 percent in March to 36.7 percent in April and only slightly increased when compared to April 2019.

“Forbearance and deferment programs have given renters a leg-up during this unexpected economic downturn – and it appears many renters have reduced their immediate debt obligations in the near-term,” said Maitri Johnson, vice president of TransUnion’s tenant & employment business. 

The analysis highlights renters’ use of credit cards during the last three months, noting that their use has actually gone down despite rising financial pressures. At the end of last year, the average renter was utilizing 45.3 percent of their available credit line. By the end of April, utilization was down to 39.8 percent, representing a 13.7 percent decrease year-to-date.

“This decrease in credit card usage demonstrates renters are actively controlling balances across all credit obligations and suggests they are avoiding placing rent payments on their credit cards,” the analysis concludes.

Stimulus payments probably helped

That encouraging data might be explained by the stimulus payments the government sent to every American early in the economic crisis. That money has likely now been spent, and Congress has begun negotiations on a potential new round of stimulus.

The TransUnion analysis shows that Americans enrolled in “acute relief” programs have been able to defer payments on more than 100 loans of all types -- but especially student loans, with 79 million accounts placed in deferment. The number of car loans in deferment programs doubled to 7.3 million.

Under these types of programs, borrowers are allowed to miss several loan payments but will be required to make them up eventually, normally with the missed payments added to the end of the loan.

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