Lenders Lean Into Risk as Subprime Lending Returns to Pre-Pandemic Levels

Subprime borrowers are back in numbers. The latest TransUnion Credit Industry Insights Report for the third quarter spotlights that the growth in consumer credit in America has come from the higher-risk side of the market.

There has been significant growth in originations of subprime credit in the forms of credit cards, auto loans, and personal loans. The importance of access has been reinforced by the increased demand. That has been met with data-enabled solutions to serve this group while keeping delinquencies in check.

Charlie Wise, SVP and head of global research at TransUnion, told us that “subprime borrowers have steadily returned to pre-pandemic levels, signaling a renewed demand for credit among consumers who may be more financially vulnerable as well as increased willingness by lenders to advance credit to higher risk borrowers.”

Wise continued, “this resurgence underscores the importance of targeted risk strategies as lenders navigate a landscape marked by both opportunity and elevated risk.”

The share of subprime consumers has climbed back to 14.4%. That’s nearly the same as before the pandemic. By comparison, the prime and near-prime tiers have continued to thin. It’s a slow fade of moderate-risk borrowers.

Jason Laky, TransUnion’s Executive Vice President and Head of Financial Services, said it was a defining shift. “While super prime has steadily grown since the pandemic, subprime has returned to pre-pandemic levels — leaving the middle tiers increasingly thinner,” he said.

Subprime Cardholders Take the Lead

New account originations rose 9% year over year to 20.5 million in Q2. That’s the strongest growth in two years, with subprime originations jumping 21%.

Lenders opened more accounts, but cautiously trimmed average credit lines. Subprime limits fell 5% year over year while the risk picture got brighter. Ninety-day delinquencies dropped to 2.37%. Payment behavior was stronger across all tiers.

“Subprime borrowers have steadily returned to pre-pandemic levels, signaling a renewed demand for credit among consumers who may be more financially vulnerable as well as increased willingness by lenders to advance credit to higher risk borrowers.” — Charlie Wise from TransUnion

TransUnion’s Paul Siegfried credited “healthier consumer credit behavior and more disciplined underwriting.” In other words, lenders are managing this without significant losses.

Subprime Auto Loans Rebound as Rate Cuts Help Buyers

Auto lending tells a similar story. Originations rose 5.2% year-over-year to 6.7 million in Q3 2025. Subprime borrowers again were among the strongest contributors. Their originations jumped 8.8%. This outpaced most other risk groups.

Ownership costs and tariffs remain challenges. Lower interest rates and steady car supplies have helped more subprime buyers get back into the market.

Fintechs Fuel Subprime Personal Loan Growth

Unsecured personal loans remain in fine condition. Originations jumped 26% year over year in the second quarter. Subprime borrowers lead with a 35% gain.

Fintech lenders account for more than 40% of the new loans. This gives greater access to subprime borrowers. Total balances climbed to a record $269 billion. Delinquency rates in subprime loans actually improved.

Mortgage Activity Rises, But Risks Shift

Subprime borrowers remain less represented in mortgages. Originations rose 8.8% year over year in Q2. This was primarily due to refinanced loans. Home equity borrowing rose for the fifth quarter in a row.

Gen Z showed the biggest gains. That means younger subprime borrowers are slowly regaining ground. Mortgage delinquencies edged up to 1.36%. FHA loans are still showing the highest past-due rates.

The Bottom Line

Subprime credit is once again a driving force in the lending economy. Subprime borrowers are fueling volume growth while delinquency rates stay mostly contained. There is a growing tolerance for risk and fintech is helping. Subprime consumers are making a comeback.