Household debt rose $313 billion in the second quarter of 2021, up 2.1% from the first quarter, according to a report by the Center for Microeconomic Data at the Federal Reserve Bank of New York. This brought total US household debt to $14.96 trillion.
Household debt balance has risen by a staggering $812 billion as of the end of 2019, according to the New York Fed’s Quarterly report on household debt and credit showed. The 2.1% increase in the second quarter was the largest since the fourth quarter of 2013, and the peak of $313 billion by volume was the largest since the second quarter of 2007.
If you are one of the Americans looking to pay off debt, there are several options that can help you. An example is taking out a personal loan while interest rates are historically low. Go to Credible to find your personal loan rate without affecting your credit score.
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How to manage and pay off debts?
The debt increase was driven by an increase in mortgage balances – the largest component of household debt, the report said. Mortgage debt rose $282 billion in the second quarter to total $10.44 trillion at the end of June.
By comparison, credit card balances also rose — up $17 billion in the second quarter — but remained $140 billion below 2019 levels, according to data from the New York Fed. Auto loans also rose, up $33 billion, but student loans offset some of the total increase with a $14 billion decline. All other debt increased by $44 billion, the report said.
“We’ve seen a very robust pace of new credit over the past four quarters with new loan extensions for mortgages and auto loans coupled with a pick-up in credit card loan demand,” said Joelle Scally, administrator for the Center for Microeconomic Data at the New York Fed. “However, there are still two million borrowers in mortgage interest deductions who are vulnerable to financial hardship once the forbearance programs come to an end.”
If you’re struggling with a load of new debt, there are several options available to reduce your monthly payments or pay off your debt. Here are a few strategies:
Take out a personal loan: Personal loans allow Americans to consolidate their debts, getting a lower interest rate and setting up a payment plan. Combining their highest-interest credit card debt into one payment reduces the amount of interest they pay over the life of the loan.
This method creates a more streamlined path to paying off debt. However, if consumers are still unable to keep up with the minimum payments on their monthly bills, they could start using their credit cards again for other purchases and put themselves in a worse financial situation. When taking out a new loan, borrowers must also change their lifestyle and spending habits, or reduce other payments as part of their debt management plan to curb their spending.
If you are interested in a personal loan, visit Credible to compare personal loan rates from multiple lenders at once and see which one works best for you.
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Transferring a mortgageMortgage refinancing offers several options to help manage debt, including refinancing to a lower interest rate to potentially save on your monthly payment and lower costs. A refinance payout could also help homeowners pay off high-interest debt with a low-interest mortgage loan. Depending on the homeowners’ current interest rate and other loan terms, they can withdraw extra money from their home to pay off credit card debt and still reduce their monthly mortgage payments.
Visit Credible to compare options and speak with a home loan expert to get all your questions answered for your debt repayment strategy.
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Buy new car insurance: Auto debt contributed to the rise in household debt in the second quarter of 2021 with an increase of $33 billion, according to the New York Fed report. This is because more Americans were buying cars coming out of the pandemic, and the cost of new and used cars has risen, driving up auto loans, the report said. But drivers can lower their overall car costs by purchasing insurance and lowering their rate. This extra money can be used to pay off their car loan or other type of debt.
If you are interested in buying a new car insurance policy, visit Credible to fill in your details and view multiple offers at once to choose the insurance plan that best suits you and your needs.
Do you have a financial question, but you don’t know who to ask it? Email The Credible Money Expert at: [email protected] and your question can be answered by Credible in our Money Expert column.