Debt is an important economic factor that can significantly influence the health of a nation’s economy. U.S. consumers have accumulated increasingly substantial levels of debt over the past several decades, which has led to various debates regarding its implications and effects on both individuals and the broader national economy. This article explores key debt statistics for U.S. consumers in order to provide insight into current trends and their potential consequences.
The first section examines aggregate consumer debt levels among all Americans, including total balances owed across different types of loans such as mortgages, auto loans, student loans, credit card debt, etc. It also looks at average debt per household and other key financial metrics related to consumer borrowing habits. The second section focuses on delinquency rates in relation to these debts – how often are people behind on payments or defaulting entirely? The last section considers whether there is evidence of increased risk-taking behavior by consumers when it comes to taking out new forms of debt with potentially higher interest rates or terms that may be less favorable than typical products available in the marketplace today.
Overall, this article provides an overview of key debt statistics for U.S. consumers and what they mean for household finances as well as the broader macroeconomic picture within the United States as a whole. By understanding these figures more deeply, readers will gain valuable insights into current trends in consumer lending and their possible long-term implications for households and businesses alike
Types Of Debt
Debt is a type of financial obligation that involves borrowed funds. It can be secured, such as when collateral is put up for a loan, or unsecured, in which case the borrower’s creditworthiness is assessed by the lender. The most common types of debt among US consumers include mortgage loans, student loans and consumer debt such as auto loans and credit cards.
Mortgage loans are used to purchase real estate property; they typically have long repayment terms with interest rates determined by market forces. Student loans help finance post-secondary education costs; their repayment terms vary based on the total amount borrowed and often involve both private lenders and government programs. Consumer debt includes any form of borrowing taken out solely for personal use; it usually has higher interest rates than other forms of debt due to its unsecured nature and shorter repayment terms.
Average Amount Owed
The average amount of debt owed by US consumers is quite high. According to data from the Federal Reserve, consumer debt in the US was over $14 trillion as of December 2019:
- Credit card debt totaled a staggering $874 billion;
- Auto loans totaled approximately $1.3 trillion;
- Student loan balances exceeded $1.5 trillion.
With regards to personal credit cards, the average balance per household with a credit card was more than $6,500 and the median balance per household was just over $2,200 in June 2020. This indicates that a significant portion of households carry an above average level of credit card debt. Additionally, total revolving debt for Americans aged 18 or older has risen significantly since 2000, increasing nearly threefold in nominal terms between 2000 and 2019. These figures clearly demonstrate that American consumers are taking on higher levels of personal debt each year.
Total Credit Card Usage
Moving on, the use of credit cards by U.S. consumers is a key indicator of debt levels in the country. According to 2019 data from Experian, total outstanding credit card balances for American households was $851 billion as of March 2019, an increase of 5% year-over-year. The average balance per household also increased 6% over 2018 numbers to reach an all time high at $7,047.
The rise in total revolving debt suggests that more Americans are relying upon their credit cards to cover everyday expenses and other bills than ever before, especially those with lower incomes or who are living paycheck-to-paycheck. This could be due to rising costs of living across the nation coupled with stagnant wage growth and limited access to alternative capital sources such as personal loans or lines of credit. As a result, many individuals may find themselves struggling beneath large amounts of debt without adequate resources or methods available to pay it off.
Average Interest Rates On Loans
The average interest rate on consumer loans in the United States is around 10%. This rate applies to a wide range of loan types, including credit cards and personal loans. Rates vary from lender to lender, but most lenders offer rates that are within the same general range as the overall national average.
Interest rates for consumer loan products also tend to be higher for borrowers with lower credit scores or who have other factors that may put them at greater risk of defaulting on their debt. Factors such as income level and employment status can influence how likely it is that an individual will be approved for a loan, and at what interest rate. A borrower’s ability to pay back their loan can also determine the final interest rate they receive.
Debt-to-income ratios are an important indicator for lenders when assessing a consumer’s ability to repay their debt. These ratios measure the total of all monthly debt payments divided by monthly gross income, which is then expressed as a percentage. Generally, lenders prefer consumers with lower debt-to-income ratios because they are more likely to make timely payments on their loan obligations. The Consumer Financial Protection Bureau (CFPB) sets the maximum accepted DTI at 43%, although some lenders may require even lower values.
Additionally, CFPB sets standards for different loan types and classifies them into three categories: Qualified Mortgages (QM), Non-Qualifying Loans (NLQ), and Temporary QMs (TQMs). For instance, NLQs can have higher DTIs than QMs but must still meet other requirements like having no risky features such as negative amortization or balloon payments. TQMs are limited to loans that extend through 2021 and follow special rules around credit score and down payment requirements while allowing certain exceptions related to DTI restrictions. Understanding these distinctions is essential in order to determine which type of loan best fits one’s financial situation.
Bankruptcy filings in the U.S. have been increasing since 2006, with an estimated 798,000 personal bankruptcy cases filed in 2020. This is a significant increase from 2019 when only 683,400 filing were reported. The most common type of bankruptcy filing was Chapter 7 which accounted for 76% of total filings during 2020 and a further 21% of cases were Chapter 13 debt reorganization plans.
The majority of people who secured relief under these programs had relatively low incomes; 80% earned less than $50,000 annually while 58% earned less than $25,000 per year. These statistics demonstrate that the burden of excessive debt has disproportionately affected those on lower incomes rather than higher income households.
The data on debt for U.S. consumers paints a concerning picture of the economic landscape in America today, as a large portion of households are struggling with high levels of debt and not enough income to cover their expenses. The average amount owed is steadily increasing, credit card usage has risen dramatically over the past few years, interest rates remain relatively high despite recent drops, and bankruptcy filings have been climbing steadily since 2005.
These statistics demonstrate that many American households have become overburdened by their finances, leading to an increased likelihood of bankruptcy or other forms of financial distress. It is clear that further action needs to be taken in order to ensure individuals are managing their debts responsibly and avoiding taking on too much debt relative to their incomes.
Creating better education around personal finance topics could help reduce these numbers going forward, while providing additional resources such as non-profit counseling services can assist those who are already dealing with unmanageable debt loads. Ultimately, it is essential that Americans learn how best to manage their money and plan for the future so they do not fall into patterns of excessive borrowing and long-term debt struggles which can lead to dire consequences.