Loan Delinquencies Rise as Consumers Struggle to Manage Debt

[Apr 3, 2009.]

 

In a recent article from CNNMoney.com, the American Bankers Association reported the highest delinquency rates since it began tracking such data in 1974. Specifically, the ABA reported a 3.22% seasonally adjusted delinquency rate in the last quarter of 2008. The ABA, which represents most large U.S. banks and credit card companies, comments that this rising delinquency rate could grow worse as unemployment rates continue to trouble the nation.

Additionally, the report detailed rising delinquencies in other consumer debt categories such as automobile loans, home equity lines of credit, property improvement loans, and other personal loans. Interestingly, although credit card delinquency rates did increase to 4.52%, they appeared to stay somewhat consistent as average delinquency rates have been 4.47% over the past four years.

Debt Consolidation Can Help Consumers Cope
For consumers who are serious about curing their debt problems, debt consolidation loans and programs have been a great way for consumers to address their issues. The most typical debt consolidation programs often combine multiple loans into a single account with a simpler monthly payment and a low rate of interest. Especially for those struggling with credit card debt reduction, the interest rates on home equity loans and other debt consolidation loans can yield quite a decent amount of monthly savings.

As mentioned in the recent ABA report, one of the major concerns is the toughening job market and high rate of unemployment. With unemployment rates already at 8.1% in February, some analysts expect the upcoming unemployment rates to near 8.5% in March. So as consumers are already struggling with existing debts, job losses will only make the situation worse. For some individuals, debt consolidation may be a necessary alternative to avoid more severe problems such as bankruptcy and foreclosure. Debt consolidation loans are available in a variety of forms such as zero percent credit cards, credit union consolidation loans, and the most common being home equity loans and lines of credit.

Consumers should keep in mind however that debt consolidation will carry its share of risks. Perhaps the most common mistake individuals make is the perpetuation of debt even after consolidation. The unfortunate truth is that debt consolidation does little to break bad debt habits by itself. For those who missed our recent article, here is a link to our own story discussing debt consolidation versus debt perpetuation.

CNNMoney : Consumer Loan Delinquencies at Record High

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.