Are consumers heading toward more debt consolidation loans? A new report from Credit Karma suggests they might be. The report, released in early May, paints a picture of the average U.S. consumer saddled with loads of debt. According to the report, the average U.S. consumer is stuck with large amounts of credit card, home mortgage, auto loan and student loan debt. Combine these large levels of debt with the nation’s still high unemployment rate and shaky economy, and you have the perfect recipe for an increase in debt consolidation loans.
The Bad Numbers
According to Credit Karma, consumers with a credit card had an average of $7,701 in credit card debt. The average U.S. consumer also carried $177,186 in home mortgage loans, $14,873 in auto loans and $27,777 in student loans. On the positive side of the ledger, the average U.S. consumer also boasted $50,889 in home equity. Credit Karma also reported that the average consumer in April of this year had a credit score of 670, up one point since the beginning of this year. There is some good news in these bad numbers. For one thing, consumers with credit cards did shave 4 percent off their revolving debt. In fact, consumer credit card debt stood at its lowest point since the beginning of 2010. Consumers in the San Diego area led the way here, decreasing their credit card debt by an impressive 10 percent. In Miami, consumers also made a dent on their credit card debt, shaving 8 percent off it.
Despite these encouraging signs, there is still plenty of evidence that more consumers will need to turn to debt consolidation loans. For one thing, average consumer credit card debt still stands 16 percent higher than the 2009 low of $6,641. The fact that the nation’s unemployment rate is showing no signs of dropping is also cause for concern. As people struggle to find work, they pay for more necessities with their credit cards. This, again, is a sure path toward debt consolidation loans.
The Debt Consolidation Option
For many consumers who fall too deep into debt, debt consolidation loans offer a financial safety net. These loans combine consumers’ various debts into one monthly payment. The goal, of course, is to set this payment at a level that the consumer can comfortably pay each month. The loans are far from perfect; they negatively impact consumers’ credit scores and come with high interest rates. But when the debt levels rise, a debt consolidation loan may be some consumers’ only option. And with the amount of debt that so many consumers are carrying today, you can bet that debt consolidation will become the only option for many more.