According to reporting from The Wall Street Journal, Americans are increasingly turning to debt to finance what many consider typical parts of the middle-class American lifestyle; cars, college, houses, and healthcare. AnnaMaria Andriotis, Ken Brown and Shane Shifflett report:
Consumer debt, not counting mortgages, has climbed to $4 trillion—higher than it has ever been even after adjusting for inflation. Mortgage debt slid after the financial crisis a decade ago but is rebounding.
Student debt totaled about $1.5 trillion last year, exceeding all other forms of consumer debt except mortgages.
Auto debt is up nearly 40% adjusting for inflation in the last decade to $1.3 trillion. And the average loan for new cars is up an inflation-adjusted 11% in a decade, to $32,187, according to an analysis of data from credit-reporting firm Experian.
Unsecured personal loans are back in vogue, the result of competition between technology-savvy lenders and big banks for borrowers and loan volume.
The debt surge is partly by design, a byproduct of low borrowing costs the Federal Reserve engineered after the financial crisis to get the economy moving. It has reshaped both borrowers and lenders. Consumers increasingly need it, companies increasingly can’t sell their goods without it, and the economy, which counts on consumer spending for more than two-thirds of GDP, would struggle without a plentiful supply of credit.
This Fed-designed debt explosion may be good for banks, builders, and auto-makers, but every time Americans borrow from their future-selves, they delay the day they will achieve financial independence.
Read more here.
Originally posted on Your Survival Guy.
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