A surprising finding has been revealed by a survey of consumers by mortgage lender TransUnion.
It found that those in financial distress will prioritize unsecured personal loans above their mortgage, auto loans and credit cards, despite the risk to their home.
The lender has carried out a similar survey every year since 2004 and mortgages have always ranked below some other credit, such as auto loans, however paying an unsecured debt first is a new revelation.
“While personal loans have existed for a long time, recent growth in the number of such loans led us to explore this product’s position along the payment spectrum,” said Ezra Becker, senior vice president and head of research for TransUnion’s financial services business unit.
“The prioritization of personal loan payments above all others is counterintuitive, but our study results are clear. We believe the relatively short duration of these loans—usually less than 30 months—is a key factor in the decision process of consumers,” added Becker.
The US-based survey shows that, even with consumers choosing to prioritize personal loans, delinquencies have increased steadily from 1.10 per cent in Q4 of 2012 to 1.49 per cent in Q4 2016. Mortgage delinquencies have declined over the same period, from 3.49 per cent to 2.44 per cent.
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