Delinquent consumer loans are near 5-year highs, and borrowers are struggling to keep up with payments

As the era of federal COVID-19 relief programs winds down and tariffs continue to push up prices, consumers are having a hard time keeping up with their debt.

A recent report from credit scoring firm VantageScore showed that consumer loan delinquency rates increased in September. Specifically, early-stage delinquencies are approaching rates not seen in five years.

The percentage of loans in early delinquency, defined as a payment that hasn’t been made within 30 to 59 days, was 1.13% last month. This is up from 1.02% in August and is close to the delinquency rate of 1.15% in January 2020, according to VantageScore.

DPD stands for days past due.

Consumer loan delinquency rates fell during the pandemic, when economic growth slowed and consumers were spending less. Additionally, many Americans received federal stimulus checks at the time, which helped them keep up with their debt. Some borrowers have also been granted relief from their debt payments, such as when the Department of Education temporarily halted all student loan payments.

However, delinquency rates began to accelerate again in 2022, as inflation began to rise and stimulus checks ran out. The Federal Reserve has managed to tame inflation somewhat, but it began to heat up again after the tariffs were announced earlier this year.

The Fed has been cautious about cutting interest rates due to rising inflation. High interest rates keep borrowing costs high and make it difficult to pay off debt. However, as the labor market deteriorated rapidly at the same time, the Fed cut interest rates by a quarter point in September and again on Wednesday.

“Banks are holding back on new lending, suggesting they are taking a more cautious stance after a strong summer,” Susan Fahey, executive vice president and chief digital officer at VantageScore, said in a press release. “Early-stage delinquencies are approaching levels last seen before the Covid pandemic.”

Of all loan types, mortgages had the fastest increase in delinquency rates. Last month, mortgage delinquency rates (90 to 119 days after the payment date) saw the largest year-over-year growth of any debt, and were at their highest levels since January 2020.

In addition, loan originations for all types of debt declined in September. As interest rates rise and home and car prices continue to rise, fewer consumers will take out car loans and mortgages than in early 2025.