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<\/a><\/p>\nTransUnion said that the reason personal loans were prioritised over other products may be due to the prevalence of debit orders for personal loans which are fixed and are often a non-negotiable condition of the loan.<\/p>\n
“Thus, the consumer is less likely to ‘choose’ to pay their personal loan or not, but instead has the loan payment automatically debited, leaving them to make their payment choices among the remaining products,” it said.<\/p>\n
When looking at why credit cards are paid ahead of retail store cards, TransUnion said that future utility may, in fact, influence consumer choice, as paying their credit cards allows them more flexibility to make future purchases from a wide range of merchants compared to their retail store cards.<\/p>\n
There are other likely reasons for the priority of personal loans in the unsecured product payment hierarchy, it said.<\/p>\n
“For example, personal loans have a fixed end date, and consumers can see a \u2018light at the end of the tunnel\u2019 in the near-term if they continue to meet their obligations, giving them relief from this one debt obligation.<\/p>\n
“This contrasts with credit cards and retail store cards, which tend to have no set end date and could potentially continue indefinitely if consumers make only minimum payments on these obligations, and then charge up the remaining available credit in the next month.”<\/p>\n
Homes, cars and credit<\/strong><\/p>\n TransUnion made similar findings when looking at secured credit products – including vehicles, homes and credit cards.<\/p>\n Conventional wisdom may suggest the first product type to enter delinquency (i.e. the one consumers would miss a payment on first) would be a credit card, followed by a vehicle loan.<\/p>\n Further, it might be expected that only in the most dire of circumstances would consumers stop paying housing loans, prioritising those payments above all other debt types.<\/p>\n The rationale – so the conventional wisdom goes – is that missed payments on a card do not put any important collateral at risk, automobiles are critical for efficiently getting to daily activities, and of course the home is the centre of one\u2019s family life and the most important asset a consumer can own.<\/p>\n However, the TransUnion study revealed that consumers generally place vehicle loan payments first, prioritising those payments ahead of home loans.<\/p>\n Credit cards, as expected, are the product in this set that consumers prioritise last and are most likely to miss.<\/p>\n