Startup Earnings: Interest Rates Weakening Loans

Artificial Intelligence (AI) Lending Marketplace start-up Stocks plunged 25% late Tuesday as rising interest rates dampened demand for loans.

The company’s third quarter earnings report Upstart’s total revenue was $157 million, down 31% from the same quarter in 2021.

Its banking partners initiated 188,519 loans totaling $1.9 billion, down 48% from the same period last year.that is 2 consecutive quarters The company delivered disappointing earnings results.

Co-founder and CEO Dave Giroire said in a news release.

The gain comes as new data from the Federal Reserve shows that rising interest rates are slowing the pace of consumer borrowing. As PYMNTS reported earlier this week, interest rates on commercial bank credit card loans are at 16.3%, up from 14.5% in the third quarter of 2021.

The Fed’s news was a bit more positive for personal loans, which averaged 10.2% on 24-month loans, but this is also up 9.4% in the third quarter of 2021. did.

read more: Consumers still tap and use cards, but credit growth is slowing

The key takeaway is that while monthly obligations are increasing, the pace is slowing. Combining the Fed’s data with his own PYMNTS research may provide insight into why.

Most consumers now live paycheck to paycheck, with over 60% living with limited spending capacity. So it makes sense that people would be more cautious about taking on new financial obligations.

And other PYMNTS reports show that Paycheck-to-Paycheck consumers are more likely to triple their credit card debt and have higher monthly balances overall. is also worth noting.

34% of people who have no problems paying their monthly bills and 47% of those who have problems paying their bills say they “always” or “usually” have a revolving balance. Among consumers who don’t live paycheck to paycheck, only 12% say credit is “always” or “usually” central.

That means most credit card debt is borne by consumers who have revolving debt and are increasingly hampered by that debt.

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