Debt Consolidation and Its Impact

QUICK GUIDE Debt Consolidation and Its Impact

Credit card debt can be crippling to the average consumer. In fact, roughly 60% of Americans don’t have the means to pay off their balances in full each month.1

And that debt makes it a challenge for consumers to get ahead financially, as they pay hundreds a year in interest, monthly payments eat up potential savings, and large balances and late payments ding their credit scores.

Debt consolidation can be a lifeline for many consumers, but does it present opportunities — or invite too much risk — for lenders?

To answer that question and more, TransUnion conducted a study2 to gain more insight into debt consolidators and their short- and long-term behaviors. Here are some powerful takeaways from that research.

Key findings from the study

The study indicates that debt consolidators tend to take advantage of the opportunity to reduce their overall debt and improve their credit standings. Some key findings include:

® Debt consolidators reduce their bankcard debt by 60%

® Credit scores increase by more than 20 points for 70% of debt consolidators immediately after consolidation

® Consumers are more likely to open a bankcard, auto loan or mortgage following debt consolidation

® Consumers perform better on all loans in their wallet after one year

® One year after consolidation, debt consolidators show signs of rebuilding credit card debt, though most remain lower than pre-consolidation levels

While consolidators do show signs of rebuilding debt one year after consolidation, their performance indicates that they tend to be lower-risk consumers. That insight may mean that you can offer debt consolidation loans more confidently, enabling you to both help consumers and capture new business.

Find consumers who are ideal for debt consolidation

The challenge for most lenders is finding the right consumers to target with debt consolidation offers. TransUnion can help.

How we do it: We’ll create a custom study just for you, offering insight into which consumers are likely to consider debt consolidation. We apply models that predict consumers’ propensity to open an unsecured personal loan. Then we test results for differing debt consolidation offers in a prescreen or ITA campaign to see what sticks.

LEARN MORE

To learn how TransUnion can help you, contact your sales rep or email [email protected].

1 Stebbins, Samuel. “Where Credit Card Debt Is the Worst in the U.S.: States with the Highest Average Balances.” USA Today, April 26, 2019. https://www.usatoday.com/story/money/personalfinance/2019/03/07/credit-card-debt-where-average-balance-highest-across-us/39129001/.

2 Results based on a research study conducted by TransUnion, using TransUnion credit data