Economy Getting Better? Delinquency Rates On Loans Improving

By Janet Peterson on January 20, 2010, 4:41 pm Posted in Economy News

An important bank industry group has reported that delinquencies on loans showed sings of improvement in the third quarter. The American Bankers Association reported that there was decline in deliquincies in the seven categories of loans. Most notably with credit card loans which saw a 0.24% drop in the third quarter alone. It was the first significant decline in all seven categories since 2007. The only exception to this significant improvement was housing loans which saw an increase in delinquencies in the third quarter.

Signs Of Life

Many in the banking industry are encouraged by this small but important gain in the economy. But some caution that even with the decline in loan delinquencies is part of the natural fluctuation in the economy. One small gain does not signify the end of the recession. One bank exec equates the decline with the slow in job loss. The decline was linked with job loss rates but it isn’t an accurate predictor of how well the economy is doing. There are several factors that go into the gain. Including, more lenient policies. Many banks have adjusted when late fees will be incurred giving loaners longer extensions.

 

Obama Pushes More Loans

President Obama has made push for banks to lend more money to consumers in an effort to stimulate the economy. He is especially eager for loans to be made to small businesses as the bread and butter of the American economy. Some worry that this influx of loan applications will lead to a greater spike in delinquencies and more fraud. Many banks are hesitant to loan money to entrepreneurs and small businesses because of the high failure rate of small business. By some reports as much as 50 percent of small businesses fail within the first two years. It’s understandable why many banks are cautious to make the commitment but someone is going to have to make a move to get the economy back on the positive side.

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