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Delinquent or Not, Beware of Rising Credit Balances

November 7th, 2016 · No Comments · Consumer Debt

by Kristy Welsh

(Last Updated On: August 25, 2017)

Delinquent or Not, Beware of Rising Credit Balances

According to a new report from credit reporting agency TransUnion, credit balances are on the rise across the board. Yet despite all this new debt consumers are carrying, delinquencies are holding pretty steady; up a bit here, down a bit there. But before you go jumping on the booming balance bandwagon, remember this: Just because you’re able to make your payments on time doesn’t mean taking on new debt is a good idea.

How Much New Debt Are We Taking On?

Personal Loans

In the 3rd quarter of 2016:

  • Personal loan balances grew more than 20 percent
  • This growth pushed personal loan balances over $100 billion for the first time
  • Average personal loan debt per borrower was $7,745 (compared to $7,102 the same time last year)

Mortgages

In the 2nd quarter of 2016:

  • The number of mortgage originations increased to 1.99 million, an increase of 3.7 percent over the same time last year

In the 3rd quarter of 2016:

  • Total mortgage balances hit $8.39 billion (compared to $8.25 billion the same time last year)
  • Average mortgage debt per borrower was $193,489 (compared to $189,428 the same time last year)

Auto Loans

In the 3rd quarter of 2016:

  • 3 million consumers had auto loans, up from 74.7 million the same time last year
  • Total auto loan balances grew to $1.1 trillion, an increase of 9 percent over the same time last year
  • Average auto loan debt per borrower was $18,361 (compared to $17,946 the same time last year)

Credit Cards

In the 2nd quarter of 2016:

  • Credit card originations were 17.62 million (compared to 15.29 million the same time last year)

In the 3rd quarter of 2016:

  • Credit card balances were $683 billion, an increase of more than 7 percent over the same time last year
  • Average credit card debt per borrower was $5,323 (compared to $5,229 the same time last year)

How Are We Handling All These Rising Credit Balances?

The results are mixed.

In the 3rd quarter of 2016, delinquencies were down for:

  • Personal loans – 3.3 percent delinquency (down from 3.32 percent the same time last year)
  • Mortgages – 2.29 percent delinquency (down from 2.5 percent the same time last year)

But at the same time, delinquencies were up for:

  • Auto loans – 1.33 percent delinquency (up from 1.19 percent the same time last year)
  • Credit cards – 1.53 percent delinquency (up from 1.44 percent the same time last year)

What’s the Takeaway?

Whether you can make timely payments or not, one thing is certain – taking on new debt is going to cost you plenty in interest fees. Plus, there’s the stress of having new debt hanging over your head. Yes, it’s worth the trade-off sometimes – financing the car you need or a home for your family – but beware of taking on more than you can handle. (By the way, carrying credit card debt is never a good idea; those balances should be paid off in full every month.)

Bottom line, don’t judge whether you should take on new debt based on whether you can make the monthly payments. Only take on new debt if it’s for something you cannot go without.

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