Debt Consolidation in a Rising Rate Economy

This report examines the trends and implications of debt consolidation loans during a period of rising interest rates. It presents findings from a study conducted by TransUnion, which analyzed consumer behavior regarding unsecured personal loans (UPLs) used for debt consolidation. The study identifies key consumer segments, particularly focusing on those leveraging UPLs for credit card consolidation. It details the performance of these consolidators compared to non-consolidators, highlighting significant metrics such as changes in credit balances, payment trends, and impacts on credit scores over an 18-month period. The report outlines that credit card consolidators tend to be in higher risk tiers and experience a decrease in card balances after consolidation, although balances may return to previous levels over time. Additionally, it discusses the implications for lenders, suggesting that targeting debt consolidators can be beneficial due to their generally better performance in managing loans compared to non-consolidators.