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2 ECONOMIC FACTORS ASSOCIATED WITH DELINQUENCY RATES ON CONSUMER INSTALMENT DEBT

By  and A. Charlene Sullivan and A. Charlene Sullivan

Abstract

Trends in loan delinquencies and losses over time and among credit types contain important information for credit managers and market analysts. The results of this study provide information about the relationship between trends in delinquency rates of portfolios of consumer credit contracts and variables related to lenders' market share, credit market growth, household financial condition and general business conditions. The results of the analysis of monthly delinquency rates for open and closed-end loan portfolios held by commercial banks between 1975 and 1986 indicated that the debt burden measure was significantly and positively associated with delinquency rates, for all types of consumer loans analyzed. Banks ' market share of consumer credit outstanding was positively associated with the delinquency rate for the average portfolio of closed-end consumer loans, suggesting that banks increased credit risk to win market share during the analysis period. However, the rate of growth of credit outstanding during the period was negatively associated with delinquency rates for closed-end loans. The rapid growth of revolving credit outstanding in the last 10 years has been statistically associated with a decline in delinquency rates for the average portfolio of revolving credit held by commercial banks. The average delinquency rate for portfolios of revolving credit accounts was significantly positively associated with the household debt burden and with the unemployment rate

Year: 2011
OAI identifier: oai:CiteSeerX.psu:10.1.1.198.8020
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