Consumers pay auto loans before mortgage, credit cards
If they have to choose, consumers are putting a priority on paying their auto loans, then their credit cards and then their mortgages, according to a new study by TransUnion.
One of the biggest impacts of the Great Recession to the credit system was its influence on consumer payment patterns, said Ezra Becker, coauthor of the study and vice president of research and consulting for TransUnion.
Consumers have been paying auto loans first by a wide margin since at least 2003. For their next payment priority, since last September, consumers are again paying their credit cards ahead of their mortgages. The change is a good sign for the housing market and the overall economy. It means consumers are no longer as concerned they will need their credit cards for day-to-day expenses.
When the market dynamic is what people expect – i.e., home values are increasing and unemployment is under control – then the payment hierarchy is stable, and people feel less need to reassess which loan relationships are more important to them, Becker said.Download Bulletin PDF