The share of consumers with recent BNPL accounts who need help coping with unsustainable debt has grown by more than 50% since 2021, according to the first study by the Achieve Center for Consumer Insights
SAN MATEO, California, September 22, 2022 / PRNewswire / – Rapid growth in BNPL (Buy Now, Pay Later) funding has had a cascading effect on consumer debt levels, according to a new study by Achieve, a leader in digital personal finance.
The full study (available here) found that an increasing number of already debt-stressed individuals are taking advantage of BNPL funding to extend their available credit limits before they need assistance to deal with unsustainable debt levels.
Get Center for Consumer Insights
The study is the first in a series planned by the new Achieve Center for Consumer Insights, an ongoing initiative that leverages Achieve’s team of digital personal finance experts to provide insight into the status of Achieve members, with particular emphasis on data and emerging trends in personal loans, consumer debt and home loans.
In addition to sharing insights gleaned from Achieve’s proprietary data and analytics, the Achieve Center for Consumer Insights intends to publish in-depth research, tailored data and thoughtful commentary in support of Achieve’s mission to help ordinary people move forward and stay on the road to a better financial future.
“Presentation of the Achieve Center for Consumer Insights together with debut of the new Achieve brand and our expanded suite of digital personal finance offerings reflects our commitment to support every stage of our members’ financial travels. We look forward to helping educate consumers about the state of their finances and keeping them updated on economic developments affecting household budgets, “said Achieve co-founder and co-CEO. Brad Stroh. “Additionally, we hope that the data and research produced by the Achieve Center for Consumer Insights will encourage thoughtful dialogue between technology and financial services professionals, academic and advocacy groups, policy makers and other stakeholders.”
The effect of BNPL on consumer debt
Ash or June 2022the percentage of resolution Achieve members with BNPL accounts on their credit reports grew 58% compared to January 2021. Although the segment of Achieve resolution members with BNPL commercial lines is still relatively low, it is also likely to be an under-representation of the full scope of the BNPL sector because very few BNPL transactions are currently reported to the three major credit bureaus.
Many BNPL users are likely to use this loan to extend their credit limits on existing credit cards and other accounts according to Achieve data, although BNPL is often advertised as a product designed for consumers who want to avoid credit cards and other traditional forms of credit.
Resolution members with BNPL loans in their credit reports have more open business lines in their credit folder than members without BNPL loans. They also have multiple total business lines, which include both current business lines and previous accounts that were closed less than 10 years ago, listed on their credit files. Achieve members with BNPL accounts had slightly higher credit card usage rates than Achieve members without resolution. They also had lower average credit scores than members without BNPL accounts. However, BNPL users had slightly higher household incomes (see Figure 1).
“The continued expansion of the BNPL industry’s reach is accompanied by a period of historic inflation and rising interest rates that are putting a strain on household finances,” said Achieve co-founder and co-CEO. Andrea Housser. “Buy now, pay later can be attractive to consumers looking for an interest-free option to pay for purchases over time. But even without the financial burden, consumers can still be overburdened by using these loans.”
The average balance on BNPL accounts of Achieve Resolution members has decreased since the beginning of 2021, reflecting the widespread availability of BNPL as a digital payment option in both virtual and physical stores. In June 2022, nearly 50% of Achieve Resolution members with at least one BNPL account were Millennials and about a third were Gen Xers. Achieve’s findings echo a recent release Study by the Consumer Financial Protection Officewhich highlights the growth in the volume of BNPL loans and consumer delay fees.
Additional key findings from Achieve Resolution
Financial difficulties evolving : Medical bills became the main reason consumers sought Achieve’s debt help, reflecting an ongoing trend that began in early 2021 (see Figure 2). Reduced income and job losses continue to account for much of the hardships of members, but have declined over the same period of time.
Generational transitions: Millennial and Generation Z members seeking help with debt through the Achieve resolution have grown since then January 2021 , while the share of Silent Generation and Baby Boomer members is declining (see Figure 3). There are strong parallels between Generation X and millennials in many key credit indicators, even though the average age of Generation X members enrolled in the Achieve resolution is 15 years older than that of millennials (see Figure 4). The two generations have comparable credit scores, household incomes, and credit histories, however, Gen Xers have multiple business lines of credit on average. Additionally, the three younger generations all have a higher average family income than Achieve Resolution members of the Silent and Baby Boomer generations.
Key results from obtaining personal loans
Manage Debt: Debt Consolidation and Credit Card Refinancing Are Top Reasons Achieve Members Get Personal Loans , consistently accounting for more than half of all new lending since the beginning of 2021 (see Figure 5). On the other hand, the share of subscribers who use personal loans to pay for large purchases is growing, representing 19% of the loans obtained in June 2022.
Personal Loan Profile: Achieve Personal Loan members had an average of 11 open business lines when they applied for a personal loan June 2022. The loan amounts range from less than $ 10,000 about $ 35,000with a slightly higher average initial loan balance $ 20,000. Key credit indicators for Achieve personal loan members remain broadly unchanged from a year ago, with the exception of the average credit score, which declined slightly in the June 2022 (see figure 6).
Make room for millennials: Millennials account for a growing share of the loan volume and the share of Achieve Personal Loan members of the Baby Boomer generation is decreasing, mirroring a similar trend in the Achieve resolution. Loans for Generation Z members were almost non-existent in 2021, but now account for 2% of transactions in June 2022 (see figure 7).
Key Outcomes To Get Home Loans
Safe access to home equity: Members who have obtained a home loan from Achieve to consolidate unsecured debts into June 2022 save an average of $ 669 per month compared to their previous monthly debt obligations (see Chart 8).
Achieve’s Home Equity Line of Credit (HELOC) program is designed to help borrowers responsibly access equity to pay off debt or increase their cash reserves, without compromising their long-term ownership goals. Members who have obtained a HELOC from Achieve to consolidate their unsecured debts June 2022 saved an average of $ 669 per month in payments over their previous monthly debt obligations (see Chart 8).
Monthly savings: The average opening balances of Get Home Loans have been between $ 43,000 And $ 59,000 from January 2021 to June 2022 with an average starting balance of $ 55,579 (see figure 9). Average monthly savings vary over time and by borrower, due to differences in debt amount, interest rate fluctuations, and other individual and market factors. from January 2021Home equity loan members have reduced debt payments on average by $ 746 per month.
Credit Score Improvement: Members typically see their credit scores increase, as well as improving their monthly cash flow after consolidating debt with an Achieve home equity loan (see Figure 10). Achieve home equity loans are structured as a fixed rate and fully drawn HELOC, allowing members to continue to access their home equity when needed throughout the draw period.
The full study, with graphs and data, can be viewed on the Achieve website or download a PDF of the report here.
Information on Reach
Reach is a leader in digital personal finance. Our solutions help everyday people to undertake and stay on the path to a better financial future, with innovative technologies and personalized support. Leveraging proprietary data and analytics, our solutions are tailored to each stage of a consumer’s financial journey and include personal loans, home loans, debt and financial assistance, and education. Achieve is based in San Mateo, California and has more than 2,700 dedicated employees across the country with hubs in California, Arizona And Texas. The company is regularly recognized as Best Place to Work.
The data above is based on a representative sample of over 100,000 members who have used resolution, personal loan, and home equity loan offers from January 2021 to June 2022. The data and results represent the products and services offered by Achieve and its affiliates, including Bills.com, LLC d / b / a Achieve.com (NMLS ID # 138464); Freedom Financial Asset Management, LLC (NMLS ID # 227977); Freedom Resolution (NMLS ID 1248929); and Lendage, LLC d / b / a obtain loans (NMLS ID # 1810501).
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