We look at various asset classes in terms of expected delinquency, default, and settlement risk, guiding US debt buyers and collection agencies (2025–2027) on where to focus.

Strategic outlook by asset class

1. Prime auto loans – Top priority

Why: Prime auto loans feature delinquency of 60 days past due (dpd) of 0.39% in early 2025 which is slightly higher than 0.35% rate and high collateral value, enabling effective recovery through repossession and resale.

Source: The Financial Brand, TransUnion

Competitive analysis:

• Dominated by firms like Encore Capital and PRA Group with significant recovery infrastructure.
  
• Structural advantages: minimal regulatory risk + tangible collateral + low impact of inflation and other macroeconomic conditions = sustained margins.

2. Credit cards – Opportunistic play

Why: Delinquency remains elevated (7.04% delinquency at 90 dpd in Q1 2025 vs. 6.86% in Q1 2024), but portfolios are abundant, and behavioral targeting enables profitable recovery.‍

Source: Federal Reserve Bank of New York, Household Debt Report Q1 2025‍

‍Competitive analysis:

• High competition from digital-first agencies and large debt buyers.
  
• Innovative collection strategies can improve metrics.

3. Subprime Auto Loans – Risky with limited upside

Why: Delinquency in subprime auto lending is 6.56% (>60 dpd) - highest since 1994, with growing loan sizes and longer terms exacerbating risk. Repossession costs are rising, and resale values are volatile.‍

Source: Fitch Ratings, Bloomberg

Competitive analysis:

• High concentration of risk with low margin.
  
• Debt buyers must absorb storage, towing, and auction losses, leaving slim net yield unless purchased at extreme discount.

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4. Personal Loans – High delinquency, unsecured exposure

Why: Personal loan balances have risen sharply (~$253B in Q1’25). Lenders appear to be limiting loan amounts for individual consumers, even as the aggregate borrower-level delinquency rate continues to decline.

Increased competition and demand in the lowest risk credit tiers, along with advances in risk management practices, are now resulting in lower delinquency rates.

These factors should support sustained growth, even in a challenging macroeconomic environment.‍

Source: TransUnion‍

Competitive analysis:

• Minimal collateral means low recovery unless tightly scored or aggressively worked.
  
• One of the first asset classes to be defaulted upon during economic slowdown for sub-prime borrowers.
  
• Most portfolios are collected through outbound digital dials and innovative practices.

5. Student loans – Complex but high risk and high return asset

Why:

• Total balance: $1.63T
• Serious delinquency (90+ days): 8.04%, up from 0.8% in Q1’24 due to a resumption of reporting of delinquent student loans on credit reports after a nearly five-year pause due to the pandemic
  
• Delinquency rates are expected to go up as borrowers are unlikely to have budgeted for this and will likely require sometime to adjust their financials
  
• Morgan Stanley estimated that payments this year will rise by a collective $1 billion to $3 billion a month‍

Sources: Federal Reserve Bank of New York, WSJ‍

Competitive analysis:

• Recoveries are slow due to income-driven repayment, moratoriums, and legal complexity.
  
• Minimal market participation by traditional debt buyers; heavily serviced by government-affiliated or specialist entities.
  
• Definitely a segment worth watching - currently closer to personal loans but can behave like secured loans if the government looks at wage garnishments as a policy.

6. Utilities & telecom bills – Underrated, fast-cycle assets

Why: Low ticket size and regular payment cycles make them quick to collect and operationally efficient.

Competitive analysis:

• Lower competition = better entry pricing.
  
• Account segmentation and self-serve strategies see higher resolution rates.

7. Medical Debt – Prevalent but sensitive

Why:

• 14M Americans owe $1,000+, and 3M owe $10K+
• A surprising 80% of people with medical debt are insured; most health plans only provide 80% payment for covered costs. 20% patient responsibility of high medical bills can leave people unable to pay their bills.

‍Sources: kff.org

Competitive analysis:

• Regulatory scrutiny around health data is high (HIPAA).
  
• Best results come from ethical, soft-touch models.

Portfolio prioritization matrix (2025–2027)

Summary

• Double down on prime auto loans, they offer security, scale, and strong margins.
  
• Use credit card debt tactically, with behavioral segmentation and tech-enabled outreach.
  
• Tap into utilities and telecom debt for consistent, under-the-radar returns.
  
• Proceed cautiously on medical debt, be compliant, ethical, and reputation-aware.
  
• Watch out for student loans, government policy change could increase collections massively but if not, they will be clubbed with personal loans.‍
• Stay out of unsecured personal debt unless a major market correction or policy shift makes them more viable.

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