The providers of debt consolidation loans received some good news in early April from the Associated Press: Consumers are borrowing money again. And when consumers add to their levels of debt, they’re more likely to one day need the services of debt consolidation loans. The big question from stats released by financial data company Thomson Reuters is whether consumers learned any lessons from the Great Recession. Namely, did they truly learn the value of saving more and spending less, or are consumers, now that the economy is showing signs of life, ready to go on another spending binge? The providers of debt consolidation loans hope it’s the latter.
Borrowing on the Rise
In January of this year, consumer borrowing actually rose. That was fairly big news. Before the January incline, consumer borrowing declined for 11 straight months. January’s increase has now been followed by a second consecutive rise in consumer borrowing in February. Economists responding to a survey by Thomson Reuters said that they expected consumer borrowing to rise at an annual rate of $500 million in February following an increase of $4.96 billion in January. The hope is that these higher levels of borrowing are signs that consumers now have more confidence in the national economy, and that they’re willing to take on more debt. But before anyone gets too excited, it’s important to note that even with the recent increases, consumer borrowing is still 4.2 percent lower than where it stood just one year ago.
Consumers Are Key
Consumer confidence, of course, is one of the keys to rejuvenating the national economy. If consumers are spending, the economy will grow. However, most economists don’t predict that consumers will truly open their wallets until unemployment takes a significant dip. The national unemployment rate still stood at 9.7 percent as of March. Unfortunately, economists predict that it will remain at this elevated level until the middle of the decade. That’s a long time to wait for consumers to begin spending in force again.
Debt Consolidation Option
As long as unemployment remains high, debt consolidation loans will remain an option. After all, when people lose their jobs, their annual income takes a dramatic tumble. They rely more on credit cards to get by until they can land new employment. As their debt rises, they might find relief only through debt consolidation loans. This is why the news that consumer spending is rising, even if only slightly, is good for the debt-consolidation industry: People are more willing to take on debt, even in this wounded economy. That means more business for loan consolidation companies.