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Transunion study shows renters are managing their debts

A new study from the credit firm Transunion shows that consumers are still managing their debts in way that may ease most landlords’ concerns, even as many are struggling with finances due to the COVID-19 pandemic.

The study found that around 25% more renters entered relief programs in March and April due to shutdown orders caused by COVID-19. But consumers have still maintained a good financial standing on their current accounts while cities and states work to contain the outbreak, the study shows.

The relief programs mentioned in the report include forbearance, deferment, and payment suspensions for various credit obligations, Transunion said.

The analysis found that renters are largely being prudent when it comes to new borrowing, and that most are not taking on new types of debt. Indeed, the percentage of renters who obtained a new source of credit fell from 37.8% in March to 36.7% in April. Moreover, more renters are paying off their credit card balances, the study found. The average credit card balance per consumer fell from $5,645 to $5,437 between March and April.

“These measures show renters have been managing their debt responsibly and rent payments have not yet been materially impacted,” the study authors said.

Meanwhile, rent payments are only slightly lower this year when compared with the last – with the study noting a 3.1% drop from 97.7% to 94.6% year over year between April 2019 and April 2020.

“Forbearance and deferment programs have given renters a leg up during this unexpected economic downturn—and it appears many renters have reduced their immediate debt obligations in the near term,” said Maitri Johnson, vice president of TransUnion’s tenant & employment business. “COVID-19 has had a significant effect on the financial health and stability of the renter population. As this situation and the economic landscape continues to evolve, early financial hardship indicators can help property owners and operators better understand consumers and make more informed decisions regarding their portfolio.” With the help of financial professionals at iva you can write off your debts.

Even so, Transunion warns landlords and property managers to exercise caution. It said that around 30% of renters whose incomes have been hit by COVID-19 say they’re worried about their future ability to pay rent.

“Right now there is little indication that renters are increasing their debt or taking on new lines of credit,” Johnson said. “The presence of federal stimulus packages have offered temporary relief for many consumers, but it is yet to be determined whether this is merely postponing payment risk increases for renters. If renters are placed under greater financial strain in the coming months, property managers should take a deeper dive into resident behaviors to better forecast the likelihood of future rent payments while actively building trust with their community.”

Mike Wheatley

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at mike@realtybiznews.com.

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