In an era marked by economic uncertainty and rapid change, lenders and investors face the challenge—and opportunity—of achieving sustainable growth through credit expansion. By balancing bold initiative with disciplined oversight, institutions can navigate the evolving landscape of consumer and private credit in 2026. This article explores how prudent lending practices, backed by rigorous risk management and insightful forecasts, pave the way for lasting success.
Consumer Credit Trends and Forecasts
The consumer credit environment in 2026 is characterized by measured growth, reflecting both resilient borrower behavior and conservative underwriting. TransUnion forecasts show credit card balances reaching $1.18 trillion by end-2026, a modest 2.3% rise from 2025 and the smallest annual increase since 2013. This slowdown follows double-digit growth in 2022–2023, driven by disciplined lender approaches to riskier segments and consumers’ focus on financial responsibility.
Delinquency rates remain stable, underscoring consumers’ ability to manage obligations even as macro pressures persist. Inflation hovers around 2.45%, while unemployment edges toward 4.5% by late 2026. With Fed rate cuts on the horizon, borrowing costs may ease further, presenting additional lending opportunities for institutions prepared to maintain rigorous risk management practices.
Despite macro headwinds, consumers appear to be maintaining healthy credit behaviors. As Michele Raneri of TransUnion notes, “Consumers appear to be managing their finances reasonably well,” highlighting an environment ripe for measured credit growth.
Private Credit Market Expansion
The private credit sector continues its rapid ascent, with assets under management (AUM) projected to exceed $2 trillion in 2026 and approach $4 trillion by 2030. This surge is fueled by increased demand for asset-backed finance, mergers and acquisitions, and leveraged buyouts across EMEA and APAC regions. Institutional investors are drawn to private credit’s yield advantages and less-correlated risk profiles.
Key growth drivers include financial innovation and demographic shifts favoring income-generating assets. Secondaries activity has also intensified, with a record $16 billion raised in the first three quarters of 2025. Market observers expect deal volumes to rise from 1% of AUM in 2025 to 2–3% over the long term, reflecting growing liquidity and investor appetite.
- US private credit grew by 50% from 2020 to 2025, surpassing $3 trillion.
- NDFI lending achieved a 23% CAGR since 2010, with recent 15% growth from 2015–2023.
- Record secondaries fundraising suggests deeper market liquidity and investor confidence.
As private credit matures amid rising competition, lenders and fund managers must differentiate through specialized strategies and strong borrower relationships.
Prudent Lending and Investment Principles
At the heart of sustained credit growth lies a commitment to time-tested principles. Brown Brothers Harriman, with over 150 years in credit investing, emphasizes that institutions should preserve capital as priority and embed “skin in the game” within their investments. Thorough fundamental research and scenario stress-testing—reflecting recessions of the 1980s, the global financial crisis, and the COVID-19 pandemic—serve as cornerstones of this approach.
- Conduct exhaustive due diligence on borrower cash flows and collateral structures.
- Target transactions below $500 million to secure favorable terms and issuer loyalty.
- Ensure first-loss positions and robust covenant protections in deal documentation.
Regulatory guidance from bodies like the FDIC and Federal Reserve reinforces these practices. Institutions are urged to maintain debt service coverage analysis, update borrower profiles regularly, and adopt internal controls that mitigate credit and compliance risks. In commercial real estate, proactive workout frameworks allow lenders to support viable projects without unnecessarily curtailing credit to responsible borrowers.
Navigating Regulatory and Economic Headwinds
The economic outlook for 2026 features steady but cautious growth. Inflation stability and Fed rate adjustments will influence borrowing costs, while rising unemployment may pressure delinquency rates. Lenders must stay vigilant, balancing expansion into underserved segments with comprehensive risk monitoring.
Regulators spotlight non-depository financial institutions, requiring greater transparency and oversight. Lenders offering small-dollar or alternative credit products should implement new protocols, third-party reviews, and clear borrower disclosures to sustain both innovation and compliance.
- Monitor macro indicators—unemployment, consumer spending, and interest rate shifts—to adjust underwriting criteria dynamically.
- Leverage advanced analytics to identify emerging risk patterns and borrower stress signals.
- Foster deeper relationships with responsible borrowers through transparent communication and tailored credit solutions.
By blending a prudent approach to loan-based investing with adaptive risk frameworks, institutions can turn regulatory requirements into competitive advantages.
Conclusion: Seizing Opportunity with Discipline
As 2026 unfolds, the dual forces of measured credit expansion and disciplined risk management define the path to sustainable growth. Whether navigating consumer credit trends or capitalizing on private credit’s momentum, success hinges on the unwavering application of core lending principles, robust stress testing, and proactive regulatory alignment.
“For lenders, these trends present an opportunity to build deeper relationships with responsible borrowers while continuing to prioritize prudent risk management,” observes Jason Laky of TransUnion. Indeed, by embedding capital preservation, thorough analysis, and clear governance at every stage, institutions can thrive amid uncertainty and deliver enduring value to stakeholders.
In this evolving landscape, those who marry ambition with caution will not only weather economic headwinds but also chart a course for transformative growth.
