Consumers All Around the U.S. Continue Their Efforts for Cutting Debt and Repair Their Finances
While it is a fact that the government is continuously trying to get rid of the deficit, consumers definitely do not have that luxury. Like just everyone else around us, we have cruised steadily through hardship and more along the road set by our personal loans and credit balances, which we built up prior to recession times.
Now, this might seem ironic, but most efforts that consumers undertake in order to rebuild their personal balance sheets and repair their credit are causing a slight delay in that very same recovery. The faster road to recovery of course would be to simply get rid of all personal credit, but since that is almost impossible, our efforts have set the stage for a healthy, though long, recovery.
Every quarter, the Federal Reserve Bank of New York takes a look at all consumer debt and credit and analyses their trends methodically. In their latest analysis, the bank found that the total outstanding consumer debt for the last quarter was around $11.4 trillion, a quite dramatic decrease from the $12.7 trillion in the same quarter of the year 2008, during the infamous recession period. What that means is that after that tough period in the economy, consumers have been steadily (and successfully) paying off their debts. What is even more, according to the Federal Reserve Bank, all types of consumer debt categories, including personal loans have improved their performance over the years.
Likewise, the number of U.S. citizens with bankruptcy notations on their credit record also fell down dramatically, up to 16% from a just a year ago. Mortgage foreclosures also dropped down, indicating a substantial recovery of the economy in the last years.
Debt repayments have also somewhat improved when compared to last year, but still have a long way to go until they reach the level of accomplished on the year 2006, long before the recession.
One aspect that clearly stood out during the last quarter and that has been a signature of the recession period is that consumers have continued to get rid of their credit cards. The pace at which they do this has of course slowed down, as has credit card delinquencies as well, going down from 13.75% in June of 2010 to 10.9% one year later
But when we come to student loans, however, the story is completely different. Student loan debts have increased by at least $303 billion, all the while other types of debt dropped. Delinquency rate for student loans increased when compared to the previous quarter, although overall it went down from 9.17% on September of the year 2010.
Now, onto personal loans. In this regard, the average amount of debt by consumers that possess a credit report is of $47,360 as of June of this year. That number is almost $6,000 down from September of 2008, before the financial crisis hit the U.S.
Overall, the economy and credit departments are heading surely towards a healthy recovery, but it will take longer than most expected to be there.