Debt Risks Remain as Consumer Borrowing Rises
Just before the turn of the new year, an article in the Wall Street Journal reported that consumer debt has “picked up” substantially in previous months. In most cases, an increase in borrowing indicates that there’s “stronger consumer demand,” the article reported. But are old debts being repaid? During the same third-quarter period, more Americans “fell further behind on repaying the nation’s $1 trillion in student loans.” Statistics from the New York Fed indicate that student loan debt has increased steadily since 2003, when it began to track these borrowing figures. But is student loan debt different from others kinds of debt? And does increased borrowing actually mean that fewer consumers face the possibility of loan defaults and bankruptcy?
Many Americans continue to deal with debt collection problems. While increased borrowing in some areas might depict an economy that’s bouncing back, it’s important to speak to an experienced Illinois consumer lawyer if you’re not being treated fairly by creditors or debt collection agencies. Contact the Emerson Law Firm today to discuss your case.
Good Borrowing and Economic Recovery
According to some economic commentators, the recent increase in consumer borrowing signals that many Americans feel that it’s safe to borrow again. In other words, they’re in a position where they can make monthly loan payments. The Wall Street Journal article sees it as a sign of “stronger consumer demand.” What kinds of loans are included here? More Americans have taken out mortgages, and there are fewer foreclosures than before the housing crash. Also significant is the rise in the number of auto loans and credit card debt. In fact, “good” mortgage debt rose by $56 billion, and auto loan debt rose by $31 billion, according to a report from the Federal Reserve Bank of New York.
Based on this report, we might take these statistics to mean that “Americans have made substantial progress shedding the debt they accumulated before the financial crisis,” and they’re “gradually borrowing more again.” In economic discussions, this process is known as “deleveraging.” This might sound like a complicated term, but it simply refers to a situation in which an entity lowers its debt percentage. This is a process that can be undertaken on a small level—by an individual or a family—or on a larger global economic level, according to a report from McKinsey Global Institute.
Yet, even though Americans are more willing to consider taking on new debt, that doesn’t mean everyone is eager to begin racking up credit card balances. Indeed, many people fear that the economic uptick isn’t here to stay, and that they could end up in a situation in which they’re defaulting on loans and being harassed by creditors.
For example, one Chicago couple told the Wall Street Journal that they recently purchased a condominium, but aren’t anxious to begin accruing credit card debt. Their story seems to be a similar one for many Americans—mortgage and auto loan debts are acceptable, but credit cards don’t seem like a safe avenue just yet. According to economist Omair Sharif, the U.S. needs to “see consumer credit, and specifically credit-card debt, move higher” if it wants to sustain its economic recovery.
On the flip side, the very high student loan debt across the country may end up hurting consumers in the long run. Most notably, student loan debt typically can’t be discharged through bankruptcy. But more significantly, perhaps, “a heavy student-loan burden can tarnish a young person’s credit,” which then “could restrain consumer spending and the broader economy.”
Chicago Consumer Lawyers Can Help
If you have questions about your debt and your rights as a consumer, contact the experienced consumer attorneys at the Emerson Law Firm today.
See Related Blog Posts:
Comments
Post a Comment