Giant personal credit score corporations which have loosened their underwriting requirements to spice up deal circulation may come beneath strain in a difficult macroeconomic surroundings, Adams Road Companions’ head of credit score underwriting has warned.
Talking to Different Credit score Investor, Fred Chung predicted that world uncertainty has elevated the possibilities of a recession within the US, prompting a necessity for heightened due diligence.
“You’ve gotten some very giant personal credit score lenders on the market that, to their credit score, have raised an immense sum of money and proceed to take action,” he stated.
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“Placing all that cash out places some strain on lenders to simply frankly do offers. And we predict that may be harmful in the event you can’t modulate that in the suitable method.”
Chung advised that lenders who’ve been extra discerning of their method will fare higher in a worsening financial local weather.
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“I do assume these which were choosy, these which were very diligent in researching and underwriting with lots of depth, the enterprise fashions that they’ve put within the portfolio will carry out higher over the medium time period than those who have emphasised quantity and circulation,” he added.
Chung’s feedback come as the most recent PitchBook knowledge revealed that giant personal credit score offers dominated the fourth quarter of 2025, driving US direct lending volumes to their highest ranges for the reason that second quarter of 2024.
The current high-profile bankcruptcies of subprime auto lender Tricolor and auto elements producer First Manufacturers have raised corporations’ underwriting processes into query, amid issues of loosening borrowing circumstances.
Nonetheless, general demand for personal credit score loans continues to outstrip provide.