The U. S. economy may be strong. But we continue to see signs…
The U. S. economy may be strong. But we continue to see signs of financial stress that indicate that just having a job may not be enough to pay the bills.
Many consumers, of course, play catch up when they receive their tax refund checks. This year, refunds could be much smaller than expected, though, so there’s even more concern about challenges ahead.
The Federal Reserve Bank of New York’s Center for Microeconomic Data disclosed that total household debt increased to $13.54 trillion in the fourth quarter last year, up $32 billion or 0.2 percent.
Overall household debt is now 21.4 percent above the post-financial-crisis bottom reached during the second quarter of 2013, according to the Fed data.
Some of the numbers:
Budget-stretched consumers are running into some trouble because they have so many other bills, such as student loan debt, to juggle.
Fed data showed that 11.4 percent of aggregate student debt was 90-plus days delinquent or in default in the fourth quarter of 2018. That’s a small improvement from the jump seen in the third quarter of 2018.
We’re seeing concern about growth in delinquencies involving auto loans, as well, particularly among younger borrowers and those with bad credit.
A record 7 million Americans are 90 days or more behind on their car loan payments, according to the Fed data.
The New York Fed noted there are now „more subprime auto loan borrowers than ever, and thus a larger group of borrowers at high risk of delinquency.“
Need a car? If you’re credit-challenged, you’re looking at taking a high-cost, subprime car loan that can eat into your overall budget.
Subprime lending grew in the second half of 2018 as lenders became more aggressive, said Jonathan Smoke, chief economist for Cox Automotive.
He said the Fed data show much higher volumes of subprime auto loans, growing more than most of the other credit tiers from July through December.
„We started to see severe delinquencies climb in fourth quarter,“ Smoke said.
What’s key to realize, though, is that delinquencies tend to be seasonal. People typically have more trouble making car payments at the end of the year and early in the year because of holiday bills, as well as big heating bills in some areas.
„They then tend to improve in spring when tax refunds are used to pay down debts,“ Smoke said.
But he’s concerned that some consumers could have more trouble paying off their old bills this spring — if they’re banking on a big tax refund and they end up receiving far less than expected.
