Ah, credit scores. Much like Aunt Betty’s famous fruitcake, it’s hard to know exactly what they’re made of. 🥮🥴 Got too much debt? We’re taking points away. Too little debt? We’re taking points away. Seems legit. 😶🌫️
Loans have been hard to come by for the average American. The result? People lean on credit cards, which are expensive AF. 💸 The good news? The Fed’s recent rate cut could give us some breathing room.
Here’s Five Fast Facts on current consumer debt trends:
- 🤓 Number Crunch - Last year, consumer debt hit a new high of $17 trillion. That’s nothing to sneeze at. Inflation-adjusted debt recently reached its highest levels since 2009. Total household debt, including mortgages, grew by 3% since 2019.
- 💳 Put It On Plastic - Thanks to lenders tightening the reins on who they lend to, cheaper forms of debt like personal loans have been tough to come by. Lenders made the criteria for getting loans much harder, mainly due to high funding costs and market distrust. Americans have been forced to rack up credit card debt instead. As of Q2 of this year, card balances jumped up 11% from the year prior.
- 📝 I Took That Personally - Personal loans help many people consolidate credit card balances with high interest rates and refinance for much cheaper. As of May, the average two-year personal-loan rate offered by banks was a little under 12%. Compare that to the average credit card interest rate of 22%.
- 🏡 Home Sweet Home - Aside from personal loans, people can also access cash through home equity. As of June, mortgage holders had a whopping $11.5 trillion in tappable equity. And people have definitely been tapping. Since the end of 2021, balances on home equity lines of credit increased 20%.
- 🙃 The Upside Down - Folks may also tap cash by refinancing their mortgage. However, since things are a little topsy-turvy, that won’t work for everyone. If you locked in your current mortgage at a lower rate than what’s being offered today, it would actually cost you money to refinance versus getting cash back. However, falling interest rates could change that.
🔥Bottom line: The Fed’s recent rate cut could change the game for the average American consumer. If you’re carrying a high balance on those credit cards, getting a personal loan to refinance could be in your future. Want to know what rich people think you should do with your money? Read this gem.
Having trouble getting a personal loan?
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