Delinquency RateCredit Repair Definition
The percentage of loans within a portfolio or group that have past-due payments.
Definition
The delinquency rate is a financial metric used by lenders, economists, and investors to measure the percentage of loans within a specific portfolio (e.g., a bank's mortgage portfolio, a pool of auto loans) or an entire market segment that have payments overdue by a certain period, typically 30 days or more. It's calculated by dividing the number (or dollar amount) of delinquent loans by the total number of loans in the portfolio. Delinquency rates are a key indicator of credit risk and economic health. Rising delinquency rates can signal worsening economic conditions or potential problems within a lender's portfolio, while falling rates suggest improving credit quality.
Frequently Asked Questions
How are delinquency rates typically categorized?
Delinquency rates are often broken down by the length of time payments are past due, such as 30-59 days delinquent, 60-89 days delinquent, and 90+ days delinquent. The 90+ day delinquency rate is often considered a measure of serious delinquency and a precursor to default or charge-off.
What factors influence delinquency rates?
Delinquency rates are influenced by macroeconomic factors (like unemployment rates, interest rates, economic growth), underwriting standards (how strictly lenders evaluated borrowers initially), loan seasoning (how long loans have been outstanding), and specific industry conditions (e.g., housing market trends for mortgages).
Why do lenders monitor delinquency rates?
Lenders monitor delinquency rates closely to assess the health of their loan portfolios, predict potential losses, adjust lending standards, manage collection efforts, and report on financial performance to regulators and investors. High delinquency rates can lead to increased loan loss provisions and reduced profitability.
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