Debt Relief Landscape Shifts
Introduction:
Traditionally, the first quarter was a peak period for credit counselors due to excessive holiday spending. However, this trend is evolving as individuals now seek assistance year-round amidst rising car loan and credit card debt.
Factors Contributing to Year-Round Debt:
* Unaffordable car loans have become more prevalent.
* Credit cards have been used to offset grocery and gas price inflation.
* Inflation remains a concern, with overall household debt reaching $18.04 trillion.
* Credit card balances have surged by 4% to $1.21 trillion.
Escalating Serious Delinquency Rates:
* Borrowers past due on auto loans and credit cards for 90 days or more are at 14-year highs.
* Car loan delinquencies are increasing across income levels and credit scores.
Impact on Individuals:
* Credit counselors are assisting individuals struggling with high car payments and living expenses.
* Car payment guidelines recommend a maximum of 13%-14% of net income, but current average payments are exceeding 20%.
* Extended loan terms of up to 78 months exacerbate unaffordable payments.
* Individuals are resorting to credit cards for basic expenses, leading to costly interest charges.
Challenges and Outlook:
* Credit card interest rates are unlikely to decrease soon due to inflation concerns.
* Consumer prices face uncertainty amidst potential tariff impacts.
Advice for Managing Debt:
* Seek professional credit counseling early, even before significant financial distress.
* Act proactively to avoid limited options and protracted debt issues.