Consumer borrowing fell in 2008 as Americans hunkered down to cut spending and boost their savings. Consumer credit fell $7.9 billion in November to $2.57 trillion, according to the Federal Reserve.
More people are trying to cut their debt and stretch their dollars as the recession has taken a heavy toll. The unemployment rate is at 7.2%, the highest level since 1993.
“Consumers have clammed up,” Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, told Bloomberg. “The reduction in consumer credit doesn’t stop here, and will spill over into 2009. Households are bolstering their balance sheets.”
Americans do need to boost their savings rate, which in November was a paltry 2.8% of disposable income, up from around 1% a couple years back. It’s just too bad that it took a financial crisis to get the savings rate to turn around.
Make it a goal to continue knocking down your credit card and other debt this year so that you can finally start to build a nest egg. If you already have some money in a savings account but are struggling with debts, take a hard look at your situation to decide whether you’ll be better off putting some of that savings toward paying off high-interest credit cards and other types of debt. The quicker you can pay off debts, the better off you’ll be in the long run.
The American Bankers Association (ABA) just announced that late payments on consumer loans in the third quarter of last year hit the highest level since record-keeping began in 1980. Delinquencies rose to a seasonally adjusted 2.9% topping the previous high of 2.88% set in 1989.
Home equity lines of credit and indirect auto loans experienced the highest increase in delinquencies. Indirect auto loans are bank loans arranged through a third party like an auto dealer.
“The number one factor in rising consumer credit delinquencies is job losses. With one million jobs lost in the first three quarters and two and a half million expected for the year, delinquencies of all types of consumer loans will likely increase in the coming quarters,” said ABA Chief Economist James Chessen. Read the rest of this entry »
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.