January 2019: Household Debt Hits $13.54 Trillion
- 5 min read
- US household start 2019 with over $13.5 trillion in debt.
- Mortgage debt increased by about 3% during 2018 but is still below the peak level of Quarter 2, 2008.
- Student loans ($1.46 trillion) and auto loans ($1.27) are each over $1 trillion.
2019 Start with Record Levels of Household Debt
Debt, debt, and more debt. Are you also facing growing debt levels? Are you able to maintain your monthly payments?
To get a perspective of the US Household Debt situation in 2018, check out data that relates to the amount of debt (housing and non-housing) and how households are coping with the situation.
Amount of Debt 2018
According to the NY Federal Reserve’s 2018 Q4 Household Report, published on February 13, 2019, American household debt increased for the 18th consecutive quarter. They estimate that,
"...total household debt increased by $32 billion (0.2%) to $13.54 trillion in the fourth quarter of 2018. ...Furthermore, overall household debt is now 21.4% above the post-financial-crisis trough reached during the second quarter of 2013. .
The following graph illustrates rising debt levels, based on the NY Federal Reserve data:
Debt and Your Financial Health
Learning about overall Household debt helps give you perspective on how you stack up. However, to effectively deal with debt you need to check your financial situation. Start by taking Bills.com Financial Health Survey. Then research your options. If you are looking for a new loan, then shop and compare.
Debt Levels Through 2018: Amounts and Changes by Type of Debt
All types of debt except for Home Equity Lines of Credit increased during 2018.
Mortgage debt is the largest type of household debt and ended the year at $9.12 trillion. Student Loan Debt level at $1.4 trillion is the second largest type of debt held by US households followed closely by auto loan debt at $1.27 trillion. Credit Card Debt continues to increase and now stands at $870 billion, reaching the pre-recession peaks of 2008.
Due to the fact that many HELOCs reached the end of their interest-only payment period, many people refinanced their loans into long-term mortgages. Therefore HELOC balances continued to a downward trend since 2009 and balances at $412 billion are “at the lowest level seen in 14 years”.
Check out this chart to see the year over year changes for the different types of debt.
To help you get some perspective on how non-mortgage debt levels changed over the years, check out the chart below. You can see a comparison of debt levels over 15-years for the different types of debt.
Here are some significant takeaways:
- Credit Card Balances increased steadily and now are back at the pre-recession 2008 levels.
- Student loan debt mushroomed and is now above $1.45 trillion. Most of that debt is now federal loans. A combination of massive borrowing and slow pay are major contributors to the heavy debt load.
- Auto loans, including a significant percentage of sub-prime borrowers, were marketed heavily and now total balances are about $1.26 trillion.
Are Households Taking New Debt? Is Credit Tight?
Households are taking new debt, and the overall credit market is mixed. For example, mortgage balances grew slowly, but based on median credit scores for new debt, mortgage requirements are strict. According to the NY Fed’s data,
"...mortgage underwriting standards remain tight.
They report that the median credit score for new mortgages was 758 and that only “10% of newly originated mortgages were to borrowers with credit scores under 660.
However, lenders targeted sub-prime borrowers for their auto loans. The median credit score for the under 660 category was 31% of new auto loans.
Student loans, for the most part, are not dependent on credit scores. The primary factors leading to new high debt levels are high college expenses, the lack of savings funds to pay for a college education, and the slow repayment of outstanding student loans.
Are Households Making Debt Payments on Time?
Although economic conditions have improved, there are still many households struggling to make their monthly payments. It is vital to keep current on all of your accounts to maintain an excellent credit score. Very delinquent and collection accounts are a sign of financial hardship.
There are different categories of delinquency ranging from 30 days late, 60 days late, 90 days late, 120 days late, to severely derogatory. While the total amount of delinquent balance has dramatically dropped since the 2008 Great Recession, total debt, as of Q4 2018, in a delinquent status is around 4.7%.
While the overall delinquency balance rate is steady at 4.7%, there are signs of increasing difficulties in repaying debt. The NY Fed’s data shows,
"Of the $630 billion of debt that is delinquent, $416 billion is seriously delinquent (at least 90 days late or “severely derogatory”).
There are increasing delinquency rates in both the credit card balances and auto loans On a positive note, new bankruptcy notations remain at historically low levels since 2016. There are less than two hundred consumers with a new bankruptcy notation, which is five thousand individuals less than new filers for the 4th quarter of 2017.
Late Payments: A Deeper Dive into Paying Off Debt Going into 2019
Late payments vary a bit based on the type of debt. Traditionally, households prioritize their mortgage payments, and those delinquency rates remain very low at about 1.1% of the total balances in a 90+ late status.
With the boom of lending to sub-prime auto borrowers, it is not so surprising that the delinquency rate for auto loans has risen. Also, many student loan borrowers are struggling with their monthly payments.
2019: Borrowing Money - New Debt and Pay off Debt
Total debt is huge. It is an integral part of our everyday financial health. Many households are looking to borrow new money. Most have already borrowed money and are looking for ways to pay off their debt.
Are you planning on taking new loans? Or are you are looking for ways to pay off your debt? Perhaps you are thinking of buying a home and taking out a cash-out mortgage? Or are you maybe considering refinancing your home? Do you want more affordable monthly payments by stretching out your mortgage term? Or, do you want to build up your equity through a shorter term mortgage?
Or maybe, you want a personal loan to consolidate debt., make home improvements or pay for college expenses.
If you are struggling with debt, there are many debt relief options. Check out Bills.com Debt Payoff Calculator to find one that best fits your situation.
Struggling with debt?
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Housing debt totaled $12.26 trillion and non-housing debt was $4.65 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in South Carolina, 37% have any kind of debt in collections and the median debt in collections is $2026. Medical debt is common and 22% have that in collections. The median medical debt in collections is $860.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.