Americans' debt rose $313B in Q2 – here’s how to help pay yours down
Household debt increased by $313 billion in the second quarter of 2021, up 2.1% from the first quarter, according to a report from the Federal Reserve Bank of New York’s Center for Microeconomic Data. This brought the total U.S. household debt to $14.96 trillion.
The new household debt balance is up a full $812 billion from the end of 2019, 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 when measured by volume, the $313 billion spike was the largest since the second quarter of 2007.
If you’re among the Americans looking to pay down debt, there are several options that can help you. One example is taking out a personal loan while interest rates are at record lows. Visit Credible to find your rate on a personal loan without affecting your credit score.
PAYING OFF YOUR DEBT – 5 STRATEGIES TO DO IT QUICKER AND EASIER
How to manage and pay down debt
The debt increase was driven by an uptick in mortgage balances — the largest component of household debt, the report said. Mortgage debt rose by $282 billion in the second quarter, to a total of $10.44 trillion by the end of June.
Comparatively, credit card balances also ticked up — rising by $17 billion in the second quarter — but remained $140 billion lower than the 2019 levels, according to the New York Fed's data. Auto loans also increased, rising by $33 billion, however, student loans offset some of the overall increase with a drop of $14 billion. All other debts grew by $44 billion, the report said.
"We have seen a very robust pace of originations over the last four quarters with new extensions of credit for mortgages and auto loans combined with rebounding demand for credit card borrowing," said Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed. "However, there are still two million borrowers in mortgage forbearance who are vulnerable to financial distress once the forbearance programs come to an end."
If you're struggling under a load of new debt, there are several options available to help reduce your monthly payments or pay down your debt. Here are a few strategies:
Take out a personal loan: Personal loans allow Americans to consolidate their debt, giving them a lower interest rate and set payment plan. Combining their highest interest rate credit card debt into one payment helps to lower the amount of interest they will pay over the life of the loan.
This method creates a more streamlined path toward paying down debt. However, if consumers are still unable to keep up with the minimum payments on their monthly bills, they could begin to use their credit cards for other purchases once again 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're interested in getting a personal loan, visit Credible to compare personal loan rates from multiple lenders at once and see which one works best for you.
SOME OF THE BEST PLACES TO GET A PERSONAL LOAN
Take out a mortgage refinance: A mortgage refinance provides various options to help manage debt, including refinancing to a lower interest rate to potentially save on your monthly payment and reduce expenses. A cash-out refinance could also help homeowners pay down high-interest debt with a low-interest mortgage loan. Depending on the homeowners current interest rate and other loan terms, they could withdraw extra cash from their home to pay down credit card debt and still lower their monthly mortgage payments.
Visit Credible to compare options and speak to a home loan expert to get all of your questions answered for your debt repayment strategy.
CREDIT CARD DEBT SURGED DURING PANDEMIC, SURVEY FINDS: HOW TO PAY IT OFF QUICKLY
Shop for new car insurance: Auto debt contributed to the rise of household debt in the second quarter of 2021 with an increase of $33 billion, according to the New York Fed's report. This is because more Americans bought cars coming out of the pandemic and the costs of new and used cars increased, driving up auto loans, the report said. But drivers can lower their total auto costs by shopping for insurance and lowering their rate. This extra money can be put toward paying down their auto loan or another type of debt.
If you're interested in shopping for new car insurance, visit Credible to fill out your information and view multiple offers at once to choose the insurance plan that works best for you and your needs.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at firstname.lastname@example.org and your question might be answered by Credible in our Money Expert column.