Debt is essential for your credit profile. Just like everything else, moderation is best. For many people, debt has become less of a financial tool and more of a need for survival. These days many people can’t make ends meet without it. A new report found that household debt rates rising significantly towards the peak of 2008.
Household Debt Rates Rising Significantly
The report found that all types of debt are rising. Mortgage loans, car loans, student loans and credit card debt are all increasing. The household debt peak in 2008 totaled $12.68 trillion. Today, it is less than 1% away from the peak at $12.58 trillion.
Mortgage loan debt rose by 1.6% and car loans by 1.9%. Student loan debt increased by 2.4%, with credit card debt balances measuring the highest by 4.3%. Along with the increase in debt is also an increase in delinquency. Debt accounts over 90 days past due have been seen alongside the rise in total debt. Similar to the smaller increase in mortgage loan and car loan debts, the delinquency rates for those are also smaller. Mortgage loan debt delinquency rose only by 1.6%, and 3.6% for car loans. The bigger delinquency rates mirrored the bigger increase in debt for student loans and credit cards. Delinquency rates for credit cards was 7.1%, while student loan delinquency rose by a huge 10.9%!
What does this mean?
Although debt levels haven’t peaked the risks for it to peak again are very real. The bigger threat is another bubble burst similar to the mortgage lending problem in 2008. More debt means more people are borrowing and borrowing more. Too much debt in any one place puts us all at risk for backlash if the system breaks. If credit card or private student loan companies don’t slow down their offering of credit they could face losing money. Lost money means higher interest rates and fees for consumers.
Proper money management and borrowing wisely are more important than ever. Everyone should take the time to evaluate their credit needs. Work towards paying off debt, not borrowing more. If you are struggling with your debts, get help. A bankruptcy attorney in Houston can help you discuss your options. Learn the pros and cons of all debt relief options in order to make an educated decision.