How economic pressures can impact digital lending today

Lending is vital for the economy. It allows consumers to buy homes, cars and more. But whether loans are approved and distributed depends on how the overall economy is doing. Changes in things like prices, interest rates, jobs and gross domestic product (GDP) can affect how people borrow and how banks decide to lend. Economic changes can make it easier or harder for people to get loans, and for banks to want to approve them. Digital lending is feeling the effects too.

Inflation and economic uncertainty

For many people, living paycheck to paycheck is the norm

During times of increased inflation and economic instability, many consumers feel anxious about their financial future. Concerns about job security and rising prices become more pressing. In fact, nearly 71% of respondents to our 2025 Consumer Lending Preference Survey said that they were either somewhat or very concerned that unexpected expenses may come up, which would affect their ability to repay a loan. That’s an increase from 58% in 2023.¹

Additionally, only 54% of American adults have three months of savings, leaving them vulnerable to debt delinquency, so even a minor disruption in income — like a medical emergency, car repair or temporary job loss — can push families into serious financial hardship. Mortgage balances, credit card balances and auto loans have all increased in the last quarter, reaching $12.61 trillion, $1.21 trillion and $1.66 trillion, respectively.²

The effect on consumers

When economic hardship strikes, it affects nearly every part of a consumer’s life

It’s rarely just one bill or one obligation that becomes difficult to manage. Financial strain can impact multiple areas at once and can happen multiple times; most families that struggle with bills have trouble three to four times per year, while 12% have trouble more than 12 times per year.³ Consumers may find themselves juggling payments to several lenders, struggling to keep up with credit card bills, auto loans, medical expenses and rent or mortgage payments.

Faced with limited income and rising costs, many are forced to make tough decisions. To stay afloat, some may turn to additional credit lines, payday loans or borrowing from multiple sources, often with a snowball effect, creating more and more debt.

As one of the lenders in this potential scenario, it is important to ask: Where do you stand? How will the loan you extended fit into their list of priorities? And what risks do you face if a borrower defaults or is unable to make consistent payments?

How lenders are responding

To help combat loan default, smart lenders are getting proactive

Despite their best intentions, borrowers occasionally default or miss payments on their loans due to unexpected hardship or job loss. When this happens, it doesn’t just affect the borrower — it impacts the lender, too. Credit scoring and other predictors are important tools in maintaining financial stability while still offering credit for deserving borrowers.

While conventional credit scoring can offer some understanding, they may not necessarily reflect all of a customer's financial circumstances. Artificial intelligence (AI)-based credit scoring and risk predictors are quickly becoming the norm. They analyze huge datasets, they’re fast, and they enable lenders to give quicker and more dependable lending judgments.

The benefits of digital lending insurance

Digital lending insurance (DLI) can be an important tool in making online lending safer for lenders and borrowers alike. Right now, many digital lenders don’t have a strong insurance plan to protect borrowers, which creates a big gap. DLI products like TruStage™ Payment Guard Insurance help fill this gap by giving borrowers a safety net if something unexpected happens, like losing a job, getting hurt or facing a covered life event that impacts their ability to repay a loan.

By adding an embedded finance option like Payment Guard Insurance into the lending process in a smooth, simple way, online lenders could make the lending system stronger and more secure. This is especially important now, as many people across the country are worried about how they will repay loans during tough economic times.

Online lenders work in a fast-changing world, where the economy is always shifting. To keep up, they need smart, flexible tools that fit into their current systems and help build trust with borrowers.

Learn more about digital lending insurance like Payment Guard.