Photo: Jeff Ferzoco / Flickr
Bank credit cards had a 41% increase in sub-prime consumers from 2010-2011, pushing sub-prime borrowing to a four-year high in December, according to a report from Equifax.Sub-prime borrowers also make up over 46% of the auto-financing market.
“The evidence of increased lending to sub-prime consumers demonstrates banks’ ongoing efforts to grow lending by providing credit opportunities to more consumers,” said Equifax Chief Economist Amy Crews Cutts. “Year-over-year results show borrowers are taking advantage of the new opportunities and seeking to diversify their financial activity, which is building momentum toward economic improvement.”
Many blamed the housing crisis on the sub-prime lending market. As such, loans trending in that direction is at least a bit worrisome. Loans of all sorts are being given at a higher rate to risky borrowers.
As of December, 66% of new student loans were held by what are deemed as “higher-risk” borrowers.
While this is not to say another crash is inevitable, it is worthwhile to keep an eye on the amount of risky loans being offered across all lending platforms.