Are Consumers Ready to Start Taking on Debt Again?

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shutterstock_104400299The Great Recession served as a wakeup call to many debt-ridden consumers. As many consumers saw their finances change for the worse, they began cutting back on debt. Consumers became wary of all types of borrowing, from using credit cards to getting car loans to applying for mortgages.

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However, the latest report from the Federal Reserve, reports the Wall Street Journal, indicates that consumers might be ready to start taking on debt again.

Americans Take Out More Loans

During the second quarter of 2013, Americans increased their borrowing in a number of areas. The Wall Street Journal reports that auto lending increased, along with mortgage lending. Even credit card balances increased during the last quarter. Even though total consumer debt is still below its 2008 peak, it appears that borrowing is on the rise.

Confidence = Willingness to Take on Risk

Debt is considered a risk to many consumers. Build up enough debt, and it can threaten your finances. You end up unable to make your payments in a timely manner. Even if you can handle your debt for the most part, you are in a fragile position because even a small financial emergency can trigger a serious problem as you have to try and meet obligations while taking care of the emergency.

Many consumers, during the recession and the sluggish recovery, have been reluctant to take on more debt because the didn’t want to take the risk. Now, though, it appears that some of that confidence has returned. Consumers feel as though they have a pretty good handle on things, and they are ready to borrow again.

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Miranda is a freelance writer and professional blogger specializing in financial topics. Her work has appeared in numerous media, online and offline. Her blog is Planting Money Seeds.

  • GamingYourFinances

    Oh gosh, I hope consumers don’t start taking on more debt. Debt is like a disease, it should be eliminated as soon as possible.

    • James Molet

      Absolutely agree! While it is unavoidable for many is some cases (e.g. home or car loans) it should be used sparingly. When not, it is most definitely like a cancer, wreaking havoc.

  • James Molet

    Hopefully some lessons were learned following the 2008 financial crisis. Ideally consumers will establish adequate emergency funds and manage credit more wisely; preferably limiting credit purchases to loans and homes.