Having lowered debt, Americans start borrowing again

Rising consumer confidence and banks that are more willing to lend are combining to end the Great Recession's frugality.

By Bruce Kennedy Aug 16, 2013 10:47AM

A young man buying a new car (© i love images, Cultura, Getty Images)Maybe things are actually improving. A new report looking at some economic indicators suggests that after years of skimping, avoiding large purchases and trying to bring finances under control, Americans have enough confidence in the recovery to start taking on more debt. And lenders are loosening their purse strings.

The Wall Street Journal examined several of those indicators, the most notable being auto lending, which increased by $20 billion in the second quarter compared with the first, its largest gain since 2006. Other measures include the increasing availability of credit, as well as a decline in payment delinquency rates.

Experts say many Americans bit the financial bullet during the recession, being frugal with their funds by attempting to pay down, or even pay off, their debts. Those efforts are bearing some fruit.

Total consumer debt was down by $78 billion last quarter to $11.15 trillion -- the lowest level in seven years. The one exception, the paper says, is student debt, which now makes up nearly 9% of all consumer borrowing, compared with 3% just 10 years ago.

"A lot of families have worked hard to deleverage," Ezra Becker, the vice president of research at credit bureau TransUnion, told the newspaper. Becker says smaller debt burdens, along with rising housing prices and a lower jobless rate -- though still far from spectacular, to be sure -- are "making the consumer feel like it is OK to spend more."

On the flip side, lenders are coming out of the protective crouch they've been in since the depths of the recession and are relaxing their credit guidelines.

"Banks and lending institutions have really opened back up to people that normally would have been turned down for loans," Alan Helfman, the president of River Oaks Chrysler Jeep Dodge in Houston, told the newspaper. "I just sold a truck to a security guard who six months ago I would have turned away."

That dealership is also reporting very strong sales, up about 20% from the same time a year ago.

More on moneyNOW

Aug 16, 2013 12:57PM
Not for this cat.. Debt is the Devil
Aug 16, 2013 2:06PM
The only thing you should have debt on is a first mortgage and a reasonable car. Anything else if you don't have the money don't buy it.
Aug 16, 2013 1:18PM
Oh great. So Americans have paid down their debts a little bit from astronomically high levels and now they're poised to run them right back up again. We never learn.
Aug 16, 2013 1:15PM
Why are people going into debt again? Two reasons-- the cost of living has been fully compromised by the diluted Dollar caused by the Fed. Also... that anyone can see we are headed for a crash that will take decades or more to climb out of... best to buy a little happiness before the crap hits the fan.
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