News

Most Rapidly Growing U.S. Debt Category (You May Be Surprised)

The financial press serves up a lot of articles on student loan, credit card and auto loan debt.

But none of those are the fastest growing U.S. debt category. That distinction goes to personal loans.

Here's an excerpt from a Nov. 29 CNBC article:

Personal loans are growing at an 11% annual clip, according to Experian.

Personal loan balances now exceed $300 billion, as of the second quarter of this year, according to Experian, a whopping 11% yearly increase. For good reason, too, as personal loans can help to consolidate credit card debt, or make funds available for major projects, such as a home remodeling effort. For many of us, the allure is hard to ignore, but personal loans do differ in some key ways from other types of credit you might use, such as credit cards. ...

Interest rates vary dramatically

As compared to credit cards, personal loan interest rates can vary much more dramatically, according to research by ValuePenguin. In fact, some borrowers with excellent credit may qualify for loans with interest rates as low as 5% or 6% with some lenders. On the other hand, borrowers with poor credit may encounter rates higher than the average credit card, sometimes exceeding 30%.

This wide range of interest rates make personal loans more affordable for those with better credit, and may make the most sense for borrowers with excellent credit who can pay off the loan in a timely manner. On the other hand, borrowers with poor or fair credit may face interest rates higher than what they'd otherwise qualify for with a credit card.

Borrowers with less-than-stellar credit should keep in mind that if your overall finances aren't in great shape, turning to a personal loan for more cash is not likely to help if it means higher interest rates and monthly payments.

As we've stated a number of times in these pages, a discussion about debt is relevant to deflation because all past deflationary episodes have been preceded by a buildup of debt that ultimately proved unsustainable.

The October Elliott Wave Financial Forecast provided an ominous look of debt on a worldwide scale. Here's a chart and commentary:

GlobalDebt

This chart of government debt as a percentage of GDP in 12 developed countries shows government's latest response to a trend that is over or nearly so. At more than 70%, government debt-to-GDP is now higher than at any time since World War II. Despite a decade-long economic expansion, the level of government debt around the world has risen 75% over this period. High debt levels will prove to be an onerous burden on global economies when economic conditions contract and deflation rears its head.

You are encouraged to read the free report, "What You Need to Know Now About Protecting Yourself from Deflation."

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