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Consumer Loans on the Rise

The gradual rebound in both the job and housing market along with lower interest rates appear to be bolstering household spending, and Americans are taking on more consumer loans. Federal Reserve figures indicated the numbers have been slowly increasing since October. The jump was certainly more than what Washington forecasted. The median forecast of 36 economists surveyed by Bloomberg called for a $10 billion figure, but a gain of $14.2 was noted. The majority of new consumer loans are student and auto loans.

consumer loans

While it’s good for the economy, many pundits wonder if it’s really good for the individual wallet. Consumer loans make up about 70 percent of the economy, and the jump in auto sales last month is a strong indicator that consumers are taking the lure of lower interest rates.

Senior U.S. strategist for TD Securities in New York also feels the increase in spending is definitely due to more confidence from lower prices, such as gasoline. The Bloomberg survey itself for consumer credit ranged from gains of $5 billion to $16.5 billion. This report does not track debt secured by real estate loans like home mortgages and home equity lines of credit.

Specifically, non-revolving debt for auto purchases and college tuition climbed $10.8 billion in October after surging $14.4 billion in September. The demand for automobiles continues to add to economic growth. According to Ward’s Automotive Group, light trucks and cars sold at a $15.5 million annual rate in November. This is up from a $14.2 million figure from the previous month and the highest gain in almost five years.

The law President Obama signed in July 2012 to keep student-loan interest rates from doubling has had a positive impact. Lending by the federal government for educational loans increased by $6.9 billion in October. Reports also show that revolving debt rose by $3.3 billion in October after a $2.19 billion decrease the previous month.

Labor market gains may also be responsible for Americans’ willingness to take on more consumer loans. In addition to the jobless rate falling to t four-year low, payrolls rose more than projected. According to Labor Department data, the economy added over 140,000 jobs in November following a 130,000 gain a month earlier. Nationally, unemployment rates have fallen from 7.9 percent to 7.7 percent.

With President Obama in office for another term, many feel he will continue to take positive strategic steps to improve the economy, and consumer loans will continue to rise.

Inquire about our consumer loan services to pay down or pay off your debt, contact Rescue One Financial we can help.

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