Consumer loan delinquency is heading in the right direction. At 2.62%, the rate has declined in 3 of the last 4 quarters, pulling back from a recent peak near 2.77%. Year-over-year, it is down 0.14 percentage points. On the surface, that looks like a recovery.
But peel back one layer and the picture gets complicated. The improvement is concentrated in prime borrowers -- households with strong credit scores and stable employment who never really struggled in the first place. Subprime auto loan delinquencies, which are not broken out in this Federal Reserve series, remain elevated by all industry accounts.
The current 2.62% is still 0.39pp above the 10-year average of 2.23%. And it is far above the pandemic-era trough of 1.52% reached in Q3 2021, when stimulus checks and forbearance programs artificially suppressed delinquencies.
Consumer delinquency data from the New York Fed's Household Debt and Credit Report shows a stark age divide. Borrowers under 30 have delinquency rates roughly 2x the national average. Borrowers over 50 are at or below pre-pandemic levels. This is not a uniform improvement -- it is an average of very different experiences.
For businesses that sell to younger consumers (restaurants, entertainment, discretionary retail), the delinquency data suggests their customer base remains under financial stress even as the aggregate number improves.
Auto loans dominate the consumer loan category at U.S. commercial banks. And auto loan performance tells a specific story: the pandemic-era used car bubble is still deflating.
Between 2020 and 2022, used car prices rose 40-50%. Lenders underwrote loans based on inflated values. Now those values have normalized, and borrowers who bought at the peak owe more than their vehicles are worth. Negative equity on an auto loan does not cause delinquency by itself, but it eliminates the option to sell the car and pay off the loan -- trapping borrowers in payments they may not be able to afford.
The good news: new auto loan originations are being underwritten at current (lower) values with tighter standards. The pipeline of potentially troubled loans is shrinking as the 2020-2022 vintage seasons out. The bad news: that seasoning process has another 12-18 months to run.
If your customers need cars to get to work and those customers are under auto loan stress, your labor pool is at risk. If you sell to consumers who are choosing between making a car payment and dining out, your revenue is at risk. Consumer loan delinquency is not an abstract banking metric -- it is a signal about the spending power of your customer base.
Consumer loans in context with other delinquency categories:
| Loan Category | Current | Prior Qtr | QoQ Change | Year Ago | YoY Change |
|---|---|---|---|---|---|
| Business Loans (C&I) | 1.34% | 1.33% | +0.01pp | 1.27% | +0.07pp |
| Commercial Real Estate | 1.58% | 1.56% | +0.02pp | 1.56% | +0.02pp |
| Consumer Loans | 2.62% | 2.71% | -0.09pp | 2.76% | -0.14pp |
| Credit Cards | 2.94% | 2.98% | -0.04pp | 3.08% | -0.14pp |
| All Loans (total) | 1.48% | 1.49% | -0.01pp | 1.53% | -0.05pp |
The consumer loan delinquency rate is 2.62% as of Q4 2025, per FRED series DRCLACBS. This includes auto loans, personal installment loans, and other consumer credit (excluding credit cards and real estate).
Improving. The rate has fallen from a recent peak near 2.77% to 2.62%, declining in 3 of the last 4 quarters. Year-over-year it is down 0.14pp.
Consumer loans include auto loans and personal loans that are extended to a broader credit spectrum than commercial lending. Subprime auto lending, in particular, carries structurally higher delinquency rates.
The peak was 4.85% in Q2 2009 during the Great Recession, when unemployment surged past 10% and millions of consumers lost income simultaneously.
Consumer delinquencies signal household financial stress. When consumers are behind on car payments and personal loans, they cut discretionary spending. Restaurants, retailers, and service businesses feel the impact through lower sales volumes.
Federal Reserve FRED series DRCLACBS. Published quarterly by the Board of Governors covering all FDIC-insured commercial banks. This is bank-held consumer loans only, not credit union or finance company portfolios.