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Consumer Attitudes Towards Debt - US - July 2014

Despite a recent increase in residential mortgage and auto vehicle lending, consumers remain cautious about taking on new loans, while lenders remain cautious about extending new credit. Consumers are particularly reluctant to borrow on their credit cards or against the equity in their homes to finance spending. At the same time, the explosive growth in student loans may prevent consumers from saving as much as they need for retirement.”
- Marla Commons, Vice President of Research

This report looks at the following:

  • How are consumers responding to their current levels of debt, and what are their plans for incurring more debt?
  • What are their priorities in paying off debt?
  • What groups are the least and most burdened by debt? How will this impact their ability to spend and save?
  • What are consumer attitudes about people who have debt and taking on new debt?

 

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Data sources
        • Consumer survey data
          • Direct marketing creative
            • Abbreviations and terms
              • Abbreviations
                • Terms
                • Executive Summary

                    • Current economic environment
                      • Consumers and household debt
                        • The consumer and attitudes toward debt
                          • Black consumers and debt
                            • Marketing strategies
                              • What we think
                              • Issues and Insights

                                  • Social media can help lenders stem the drop in home equity lending
                                    • The issue
                                      • The implication
                                        • Figure 1: Types of debt in household – Secured debt, by visits social media websites daily, April 2014
                                      • Look further down the credit spectrum for debt customers
                                        • The issue
                                          • The implication
                                            • Frame debt-reduction services to minorities
                                              • The issue
                                                • The implication
                                                • Trend Application

                                                    • Trend: Entrepreneurial Spirit
                                                      • Trend: Help Me, Help Myself
                                                        • Trend: Click and Connect
                                                        • Current Economic Environment

                                                          • Key points
                                                            • The economy continues to recover at moderate pace
                                                              • Figure 2: Quarterly change in GDP growth, 2008-14
                                                            • Payrolls rise while unemployment rate falls
                                                              • Figure 3: Nonfarm payrolls, 2009-14, in thousands
                                                              • Figure 4: US unemployment rate, 2008-14
                                                            • Consumer spending and GDP growth
                                                              • Figure 5: Real personal consumption expenditures, Jan. 1, 2000-Nov. 1, 2013
                                                            • Recovery in housing boosts household wealth
                                                              • Figure 6: Case-Shiller 20-city home price index, 2006-14
                                                              • Figure 7: Owners’ equity in residential real estate, in millions of dollars, 2005-13
                                                              • Figure 8: Owners’ equity in residential real estate, in percent, 2005-13
                                                          • Consumers and Household Debt

                                                            • Key points
                                                              • Total consumer loans outstanding rise nearly 4% after long decline
                                                                • Figure 9: Total consumer loans outstanding, in trillions of dollars, 2003-14
                                                              • Mortgage debt rises 3% but still down 12%
                                                                • Figure 10: Total mortgage loans outstanding, in trillions of dollars, 2003-14
                                                              • Mortgage growth forecast anticipates further decline
                                                                • Figure 11: Residential mortgage originations, in trillions of dollars, 2000-14
                                                              • Mortgage delinquency rate has dropped sharply
                                                                • Figure 12: Mortgage loan 90-day delinquency percentage, 2003-2014
                                                              • Home equity lines of credit have fallen by more than a quarter
                                                                • Figure 13: Total home equity lines of credit outstanding, in trillions of dollars, 2003-14
                                                              • HELOC delinquency remains far above historic norms
                                                                  • Figure 14: Home equity line of credit 90-day delinquency percentage, 2003-14
                                                                • Credit card debt has dropped sharply as consumers switch to debit
                                                                  • Figure 15: Total credit card loans outstanding, in trillions of dollars, 2003-14
                                                                • Credit card delinquency rate falls to more than 10-year low
                                                                  • Figure 16: Credit card loan 90-day delinquency percentage, 2003-14
                                                                • Auto lending has picked up
                                                                    • Figure 17: Total auto vehicle loans outstanding, in trillions of dollars, 2003-14
                                                                  • Auto loan delinquency has declined to three-year low
                                                                    • Figure 18: Auto vehicle loan 90-day delinquency percentage, 2003-14
                                                                  • Student loan volume skyrockets
                                                                    • Figure 19: Total educational loans outstanding, in trillions of dollars, 2003-14
                                                                  • Student loan delinquency soars
                                                                    • Figure 20: Student loan 90-day delinquency percentage, 2003-14
                                                                • Innovations and Innovators

                                                                  • Key points
                                                                    • Peer-to-peer lender SoFi helps student borrowers to refinance, find jobs
                                                                      • Wells revamps HELOCs to require principal payments
                                                                        • Credit scorer helps widen pool of eligible borrowers
                                                                          • Walmart adds receipt comparison tool to mobile app
                                                                            • Synchology, Social Money let companies offer a suite of mainstream financial products
                                                                              • Discover adds free FICO scores to monthly cardholder statements
                                                                                • Mobile phone app rewards users for saving and paying down debt
                                                                                  • MoneyDesktop tool updates as financial goals are met
                                                                                    • Capital One launches service to catch unwanted card charges
                                                                                      • Credit card issuers extend 0% interest offers to nearly two years
                                                                                        • Smartphone app makes it easier to transfer balances
                                                                                          • Wells Fargo presents video series on paying for college
                                                                                          • Marketing Strategies

                                                                                            • Key points
                                                                                              • Overview
                                                                                                  • Figure 21: Home Affordable Refinance Program from Quicken Loans direct mail ad, 2014
                                                                                                  • Figure 22: Home Equity Credit Line from Huntington National Bank, Direct mail ad, April 2014
                                                                                                  • Figure 23: Home Equity Lines of Credit from Royal Bank America direct mail ad, 2014
                                                                                                  • Figure 24: Equity-100 Program from NewDay Financial direct mail ad, April 2014
                                                                                                  • Figure 25: Simplicity Visa from Citibank direct mail ad, 2014
                                                                                                  • Figure 26: Slate Visa from Chase direct mail ad, 2014
                                                                                                  • Figure 27: Student Loan from SoFi Lending Corp direct mail ad, 2014
                                                                                                  • Figure 28: Smart Option Student Loan from Sallie Mae email ad, 2014
                                                                                                  • Figure 29: Automotive Sales from General Motors direct mail ad, 2014
                                                                                                  • Figure 30: Reverse Mortgage from TerraVista Mortgage, LP direct mail ad, 2014
                                                                                              • Consumer Types of Debt in Household

                                                                                                • Key points
                                                                                                  • Mortgages, auto loans are most common secured debts
                                                                                                      • Figure 31: Types of debt in household, April 2014
                                                                                                    • Age correlates with mortgages, but not auto loans
                                                                                                        • Figure 32: Types of Debt in Household – Secured debt, by age, April 2014
                                                                                                      • Highest earners most likely to have mortgages
                                                                                                          • Figure 33: Types of debt in household – Secured debt, by household income, April 2014
                                                                                                        • Blacks, Hispanics less likely to have mortgages
                                                                                                            • Figure 34: Types of debt in household – Secured debt, by race/Hispanic origin, April 2014
                                                                                                          • Urban dwellers least likely to have mortgages
                                                                                                            • Figure 35: Types of debt in household – Secured debt, by area, April 2014
                                                                                                          • Youngest most likely to have student loans
                                                                                                              • Figure 36: Types of debt in household – Unsecured debt, by age, April 2014
                                                                                                            • Student loan burden falls mostly on lowest incomes
                                                                                                              • Figure 37: Types of debt in household – Unsecured debt, by household income, April 2014
                                                                                                            • Blacks have more credit card, student debt
                                                                                                                • Figure 38: Types of debt in household – Unsecured debt, by race/Hispanic origin, April 2014
                                                                                                              • Credit scores correlate with having a mortgage
                                                                                                                  • Figure 39: Types of debt in household – Secured debt, by credit score, April 2014
                                                                                                                • Lowest scored people most likely to have credit card, student loans
                                                                                                                    • Figure 40: Types of debt in household – Unsecured debt, by credit score, April 2014
                                                                                                                • Consumer Household Financial Situation

                                                                                                                  • Key points
                                                                                                                    • Largest group of consumers has highest credit scores
                                                                                                                      • Figure 41: Credit score, April 2014
                                                                                                                    • Credit scores get better with age
                                                                                                                        • Figure 42: Credit score, by age, April 2014
                                                                                                                      • Credit scores rise with household income
                                                                                                                        • Figure 43: Credit score, by household income, April 2014
                                                                                                                      • Blacks tend to have lowest credit scores
                                                                                                                          • Figure 44: Credit score, by race/Hispanic origin, April 2014
                                                                                                                        • Higher credit scores in suburbs, rural areas
                                                                                                                          • Figure 45: Credit score, by area, April 2014
                                                                                                                        • Higher scores give borrowers more options
                                                                                                                          • Figure 46: Credit score, by credit card activity and usage, April 2014
                                                                                                                        • Lowest scored borrowers not unduly stressed about their debts
                                                                                                                            • Figure 47: Credit score, by attitudes toward personal debt situation, April 2014
                                                                                                                          • Highest scorers have more savings, better prepared for retirement
                                                                                                                            • Figure 48: Credit score, by debt and the financial future of the household, April 2014
                                                                                                                          • Student loans a big reason why many can’t save money
                                                                                                                              • Figure 49: Credit score, by debt and the financial future of the household, April 2014
                                                                                                                            • Most see no relief from debt in their lifetimes
                                                                                                                              • Figure 50: Credit score, by debt and the financial future of the household, April 2014
                                                                                                                          • Total Amount of Unsecured Debt

                                                                                                                            • Key points
                                                                                                                              • Largest percentage of consumers have less than $5,000 in unsecured debt
                                                                                                                                • Figure 51: Amount of unsecured debt, April 2014
                                                                                                                              • Youngest respondents have most unsecured debt, likely student loans
                                                                                                                                • Figure 52: Amount of unsecured debt, by age, April 2014
                                                                                                                              • Unsecured debt equals annual income for many low earners
                                                                                                                                • Figure 53: Amount of unsecured debt, by household income, April 2014
                                                                                                                              • Rural dwellers have more unsecured debt
                                                                                                                                • Figure 54: Amount of unsecured debt, by area, April 2014
                                                                                                                              • Many low-scored respondents have lots of unsecured debt
                                                                                                                                • Figure 55: Amount of unsecured debt, by credit score, April 2014
                                                                                                                              • Total amount of secured debt
                                                                                                                                • Figure 56: Total amount of secured debt, April 2014
                                                                                                                              • Incomes correlate with secured debt loads
                                                                                                                                • Figure 57: Amount of secured debt, by household income, April 2014
                                                                                                                              • Blacks have relatively less secured debt than Whites
                                                                                                                                • Figure 58: Amount of secured debt, by Hispanic origin, April 2014
                                                                                                                              • West, East coasts have biggest secured debts, due to home prices
                                                                                                                                • Figure 59: Amount of secured debt, by region, April 2014
                                                                                                                            • Credit Card Activity and Usage

                                                                                                                              • Key points
                                                                                                                                • Nearly half say they have reduced credit card debt
                                                                                                                                  • Figure 60: Credit card activity and usage – Credit card revolvers, April 2014
                                                                                                                                • Ability to manage credit card debt improves with age
                                                                                                                                  • Figure 61: Credit card activity and usage – Credit card revolvers, by age, April 2014
                                                                                                                                • Highest earners better able to reduce debt
                                                                                                                                  • Figure 62: Credit card activity and usage – Credit card revolvers, by household income, April 2014
                                                                                                                                • Blacks, Hispanics falling behind in debt management
                                                                                                                                    • Figure 63: Credit card activity and usage – Credit card revolvers, by race/Hispanic origin, April 2014
                                                                                                                                  • Homeowners manage card debt better than renters
                                                                                                                                    • Figure 64: Credit card activity and usage – Credit card revolvers, by residence, April 2014
                                                                                                                                  • Higher credit scores mean less debt, more happiness
                                                                                                                                    • Figure 65: Credit card activity and usage – Credit card revolvers, by credit score, April 2014
                                                                                                                                • Attitudes toward Personal Debt Situation

                                                                                                                                  • Key points
                                                                                                                                    • Respondents don’t stress on debt
                                                                                                                                      • Figure 66: Attitudes toward debt, April 2014
                                                                                                                                    • Debt worries decrease with age
                                                                                                                                      • Figure 67: Attitudes toward debt, by age, April 2014
                                                                                                                                    • Younger women more concerned than men about debt
                                                                                                                                      • Figure 68: Attitudes toward debt, by gender and age, April 2014
                                                                                                                                    • Income eases debt worries
                                                                                                                                      • Figure 69: Attitudes toward debt, by household income, April 2014
                                                                                                                                    • Debt burdens impact Blacks’ lives more; more Blacks are “underwater”
                                                                                                                                        • Figure 70: Attitudes toward debt, by race/Hispanic origin, April 2014
                                                                                                                                      • Homeowners in better debt shape than renters
                                                                                                                                        • Figure 71: Attitudes toward debt, by residence, April 2014
                                                                                                                                      • Higher credit scores mean more happiness about debt
                                                                                                                                        • Figure 72: Attitudes toward debt, by credit score, April 2014
                                                                                                                                    • Debt and the Financial Future of the Household

                                                                                                                                      • Key points
                                                                                                                                        • Retirement outlook looks bleak for most
                                                                                                                                          • Figure 73: Attitudes toward finances and retirement saving, April 2014
                                                                                                                                        • Student loans are still a burden to many approaching retirement
                                                                                                                                          • Figure 74: Attitudes toward finances and retirement saving, by age, April 2014
                                                                                                                                        • Retirement picture improves with income, but not a whole lot
                                                                                                                                          • Figure 75: Attitudes toward finances and retirement saving, by household income, April 2014
                                                                                                                                        • Blacks more unprepared for retirement, but optimistic about debt
                                                                                                                                          • Figure 76: Attitudes toward finances and retirement saving, by race/Hispanic origin, April 2014
                                                                                                                                        • Self-employed are better prepared than most
                                                                                                                                          • Figure 77: Attitudes toward finances and retirement saving, by employment, April 2014
                                                                                                                                        • Northeast, Midwest are best prepared for tomorrow
                                                                                                                                          • Figure 78: Attitudes toward finances and retirement saving, by region, April 2014
                                                                                                                                        • Homeowners way more prepared for the future than renters
                                                                                                                                          • Figure 79: Attitudes toward finances and retirement saving, by residence, April 2014
                                                                                                                                        • Respondents outside urban areas better prepared than city folks
                                                                                                                                          • Figure 80: Attitudes toward finances and retirement saving, by area, April 2014
                                                                                                                                        • Credit card debt holding down prospects for lower scored people
                                                                                                                                          • Figure 81: Attitudes toward finances and retirement saving, by credit score, April 2014
                                                                                                                                      • Interest in Debt Assistance

                                                                                                                                        • Key points
                                                                                                                                          • Switching to debit is most common way to reduce debt
                                                                                                                                            • Figure 82: Interest in debt-reduction products/services, April 2014
                                                                                                                                          • Men more willing than women to use prepaid cards
                                                                                                                                            • Figure 83: Interest in debt-reduction products/services – Have used, by gender, April 2014
                                                                                                                                          • Youngest most interested in debt-reduction tools
                                                                                                                                            • Figure 84: Interest in debt-reduction products/services – Have used, by age, April 2014
                                                                                                                                          • Lowest earners more interested in debt-reduction services
                                                                                                                                            • Figure 85: Interest in debt-reduction products/services – Have used, by household income, April 2014
                                                                                                                                          • Blacks, Hispanics more likely to seek debt help tools, switch to debit
                                                                                                                                              • Figure 86: Interest in debt-reduction products/services – Have used, by race/Hispanic origin, April 2014
                                                                                                                                            • Renters more inclined to use debt-reduction tools than homeowners
                                                                                                                                              • Figure 87: Interest in debt-reduction products/services – Have used, by Residence, April 2014
                                                                                                                                            • Low scorers more likely to seek services to reduce debt
                                                                                                                                              • Figure 88: Interest in debt-reduction products/services – Have used, by credit score, April 2014
                                                                                                                                            • Youngest group more inclined to try debt tools
                                                                                                                                              • Figure 89: Interest in debt-reduction products/services – Have not used but would be interested, by age, April 2014
                                                                                                                                            • Hispanics most interested in online budgeting tools, Blacks favor personal advice
                                                                                                                                              • Figure 90: Interest in debt-reduction products/services – Have not used but would be interested, by race/Hispanic origin, April 2014
                                                                                                                                            • Renters more likely to seek advice than homeowners
                                                                                                                                              • Figure 91: Interest in debt-reduction products/services – Have not used but would be interested, by residence, April 2014
                                                                                                                                            • Subprime borrowers most interested in debt management tools
                                                                                                                                              • Figure 92: Interest in debt-reduction products/services – Have not used but would be interested, by credit score, April 2014

                                                                                                                                          Consumer Attitudes Towards Debt - US - July 2014

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