Fed: Consumer debt falls to lowest levels in seven years

Consumer Debt Levels

This blog recently discussed how U.S. credit card delinquency fell to its lowest levels in 20 years. There is even more good news for the nation’s economy, as recent numbers show that consumer confidence levels are rising as their overall debt levels lower.

The Wall Street Journal further explained this trend, citing data released earlier this week from the New York Federal Reserve. According to that organization, total consumer debt declined by $78 billion last quarter to $11.15 trillion—the lowest level since 2006. Additionally, auto lending increased by $20 billion in the second quarter from the previous quarter, which is the largest gain in seven years.

“Most of the adjustment was due to a decline in the amount of debt tied to outstanding home loans, likely due to lenders’ write-offs from foreclosures and recent gains in home prices that helped owners sell,” the Journal said.

Furthermore, the news source added that American consumers are making great progress, and are finally able to cut down on debt that weighed on their households for years.

The nation’s residents are also doing a better job at keeping up with their bills, according to data from the New York fed. Now, just 5.7 percent of consumer debt is 90 days or more past due, which is the lowest level since 2008.

Even as consumers become more confident and begin to look for more investments, financial institutions must ensure that they choose creditworthy borrowers. By investing in strong credit application and loan management software, banks can know which borrowers will make timely payments and stay on top of their loans.

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