Debt Woes Shift to Year-Round Crisis as Consumers Battle Soaring Car Loans and Credit Card Debt

The traditional post-holiday debt surge is fading, replaced by a persistent year-round financial stress for Americans. Credit counselors are seeing a rise in year-round debt struggles due to unaffordable car loans and ballooning credit card debt.

Changing Landscape of Debt

"The landscape has changed significantly," says Bruce McClary, spokesman for the National Foundation for Credit Counseling. "We're hearing more people expressing financial distress throughout the year."

Car loans, once considered affordable, have become increasingly burdensome, trapping many borrowers. Additionally, consumers are relying heavily on credit cards to offset rising costs of groceries and gas, leading to record credit card balances.

Staggering Debt Figures

Overall household debt has reached $18.04 trillion, with a substantial portion attributed to surging credit card balances. Serious delinquency rates for auto loans and credit cards have reached 14-year highs.

"Automobile loan payments are significantly high and causing significant financial strain," notes Victor Russell, operations manager at Apprisen, a nonprofit credit counseling agency.

Income Spectrum Affected

Despite the rise in credit card balances and delinquency rates, the issue extends beyond low-income households. The NY Fed report indicates that auto loan delinquencies are increasing across various credit score and income levels.

Unaffordable Car Payments

Experts recommend car payments should not exceed 13%-14% of an individual's net income. However, with average payments for used cars at $525 and new cars at $734, affordability is a major concern.

"Some borrowers are allocating over 20% of their income towards car payments," says Russell. "This unsustainable practice is contributing to the financial struggles we're witnessing."

Lengthy Loan Terms and High Credit Card Rates

Car loan terms have also increased to 78 months, leaving consumers with unmanageable debt for extended periods. Compounding this issue are high credit card interest rates averaging above 20%, further exacerbating the debt burden.

Outlook and Advice

With inflation remaining a challenge and potential tariff increases, consumers are advised to seek professional financial assistance promptly.

"Don't wait until it's too late," urges McClary. "Reach out to a credit counselor now to explore your options and find a solution."