A deeper understanding of payment shock dynamics

Abstract

A shock is a sudden, upsetting or surprising event. In the context of credit, a payment shock is a change in payment obligations that a consumer cannot control. In this paper, the findings of a new analysis from TransUnion will be outlined to understand the dynamics of payment shocks arising from an increase in interest rates. The steps for identifying consumers at risk of a payment shock will be reviewed, how many consumers are affected will be outlined and how much consumers’ payments would increase will be determined. Finally, the paper will provide strategies for mitigating the risks associated with a payment shock.