HIGH POINT — Furniture Today asked second-look consumer finance companies to crystal-ball about the impact of the COVID-19 crisis on younger consumers’ use of second-look finance options going forward.
Cautious optimism over the long-term is Genesis Credit President Mark Denman’s take on secondary lending, and he likened COVID-19’s fundamental impact on younger consumers’ access to credit and where they’ll get it to the situation coming out of the Great Recession.
“Primary lenders will again implement measures to mitigate portfolio risk, increasing the exposure of young credit buyers to near-prime/second-look financing solutions,” Denman said. “Given our company’s successful experience during and after the 2008 financial crisis, we can speak with authority when we state that young consumers building their credit will be more successful in the long term if they are provided products with simple terms at fair prices from the beginning.”
Vive Financial believes second-look financing options are more important than ever and can attract younger consumers, according to President Ryan Ray.
“Approving younger customers for second-look achieves loyalty to both the home furnishings retailer and lender that enables consumer purchases in these uncertain times, awareness and more referral business for home furnishings retailers that offer second-look options, and repeat purchases at a higher frequency with the second-look line of credit,” Ray said.
Along with rebuilding their credit scores, Fortiva CEO Jeff Howard pointed out that younger consumers tend to have lower incomes and fewer savings, leading to a greater need for credit as they move to their household formation years.
“The big change will be who provides that credit,” Howard said. “In economic downturns, traditional banks tend to move up market and refocus on even more prime consumers. This leaves a larger percentage of the population, of all ages, to be served by providers of second-look options.
“The key to retailer’s success is partnering with a second-look provider who has the technology and proven wherewithal to meet all of your customers’ needs through economic cycles.”
Prior to the COVID-19 pandemic, Fortiva estimates it covered 40% of consumers in the United States with less than prime credit scores.
“After this crisis, we believe more consumers will need access to second-look financing due to the effect the pandemic will have on the economy,” Howard said.
Mike Rittler, head of Retail Card Services at TD Bank, believes it will be interesting to see how Millennials weather this storm and how the pandemic shapes their attitudes and behaviors. According to TD’s research, Millennials have been fueling purchase behavior of late.
“Will this crisis rock their confidence, or will this just be a blip longer term on what we’re seeing?” he said, adding that consumer measurements beyond FICO scores will actually expand credit availability. “I think a lot of what we’ll learn is which pieces of information are predictive, and this will really help us fine-tune the tools that we use in understanding credit-worthiness.
“What this will do in long run with banks is we’ll get smarter using the tools we have, and what that does is allow us to lend more broadly, deeper. S0 the long-term effect I think is there will be more credit availability.”
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May 18, 2020 at 06:03PM
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Lenders look at younger consumers' credit behavior, second-look financing - Furniture Today
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