Families Pile on Debt as Payday Loan Concerns are Weighed, Real Estate Counted On
By J.J. CameronPayday Loan Writer
Based on the Federal Reserve Board's most recent Survey of Consumer Finances, American households piled on more debt between 2001 and 2004 than ever before. Meanwhile, their net worth barely increased.
The triennial survey, which asked questions on income, assets and debt, tracked roughly 4,500 families representing a cross section of the country. The idea was to gauge where individuals stand and maybe even to get an idea of how many have considered the use of faxless payday loans in order to solve such fiscal woes.
The report said that as debt levels rose during the three-year period, families devoted more of their incomes to servicing debts, despite a general decline in interest rates. Tracking the issue:
- In 2001, U.S. families carried a median debt load of $41,300, including mortgages, lines of credit, installment loans, cash loans and credit-card balances.
- By 2004, the median debt load had climbed to $55,300, a 33.9 percent increase.
Kendall Oliphant, director of operations for Salt Lake-based Thredgold Economic Associates, said the survey offers a good history lesson, but it does not tell a lot about what is happening right now.
"The fact that it is talking about a time period where we were in recession and then a weak recovery period, that's not surprising that the numbers are a little bit ugly," said Oliphant, who added that in 2001 U.S. bankruptcies were up 19 percent.
Kelly Matthews, executive vice president and economist at Wells Fargo, said that while households are taking on more debt and being forced to look into online payday loans, appreciating home values have put homeowners in a solid financial position.
"In the period since that study has occurred," Matthews said, "real estate values and the improvement in our stock portfolios suggest to me that net worth is increasing and, I believe, increasing noticeably faster than aggregate debt levels."
Mortgage debt showed the largest percent increase over the 2001-2004 period, rising 27.3 percent. For those borrowing against home equity, the median balance was $22,000 in 2004, up from $16,000 in 2001.
The survey said 46.2 percent of U.S. families carried credit card balances in 2004, a 1.8 percentage point increase from 2001. Overall, the median balance of credit card debt during the period rose 10 percent to $2,200. Numbers for payday loan debt were not included.
