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.
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.
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