The United States has had its struggles over the last couple of years, as has the rest of the world. But in alarming news, one of the most surprising and painful problems facing American households is record-breaking consumer debt. The numbers are unnerving, especially in light of the economic uncertainty that has undercut global recovery from the COVID-19 pandemic. Resolvly LLC takes a look at what segments of the U.S. debt have hit consumers the hardest.
Credit Card Debt Up in Q2
The Federal Reserve Bank of New York reports that U.S. household debt escalated to $313 billion in the second fiscal quarter of 2021. Percentage-wise, that’s the biggest in seven and a half years. As of June 30, the total American debt hit a crest of nearly $15 trillion一the highest ever一and an increase of almost 6% of the debt owed at the end of 2019.
The pandemic slowed down U.S. credit card use in 2020, as many consumers found themselves laid off and hesitant to incur new debts until the economy returned to full force. Others were able to use their funds from U.S. stimulus packages to pay down their existing debt.
With the gradual reopening of the economy, credit customers are beginning to spend more freely again. In Q2, credit card debt rose by $17 billion to $790 billion. That’s a fraction of the $930 billion in credit card debt in the last quarter before COVID-19 struck, but the Q2 increase remains significant.
Mortgage Debt Skyrockets
The biggest driver of consumer debt in Q2 was the segment that typically dominates a homeowner’s debt profile: mortgages. Mortgage loan debt shot up to $282 billion in Q2, reaching a total of $10.44 trillion.
This increase in mortgage debt follows a time when many homeowners received temporary forbearance on making home loan payments during the COVID-19 pandemic. Combined with the rise in mortgage debt, the end of those repayment breaks may put a severe financial strain on many homeowners.
Car Loan Debt Increases
One area of debt that didn’t recede during the COVID-19 pandemic was auto loans. Indeed, America’s total car loan debt reached $1.42 trillion in 2021 Q2, capping a ten-year period in which auto debt doubled in this country.
Auto loan debt has increased so much in the last decade it’s now neck-and-neck with America’s total student loan debt, which as of now sits at $1.59 trillion. With car prices going up—thanks partly to chip shortages that have halted new manufacturing—those with rising auto debt may be forced to make hard choices in the coming years.
Resolvly: Helping You Beat the Debt Crisis
Based in Boca Raton, Resolvly LLC is a lawyer referral service with full approval from the Florida Bar. We help our U.S. clients nationwide find attorneys who are experts in debt dismissal. Since 2015 Resolvly has helped clients pay down or eliminate their credit card, private student loans, business, medical, and auto debts—legally and practically.