The Role Third-Party Debt Collection Plays in the US Economy #5

Consumer Credit in the US Economy

Credit accessibility is an important part of the US economy. There as over $3.5 trillion in outstanding consumer credit at the end of October 2015.  Household participation across consumer credit was around 70% for credit cards, 30% for auto loans, 45% for mortgages, and 19% for student loans. There are two key reasons that consumer credit availability is so important. The first is that allows a consumer to purchase a high-cost product that they would normally be unable to afford, and the other is that it allows a consumer to absorb a temporary unexpected cost that damages their budget.

Research shows that the majority of consumer credit was used to purchase consumer-orientated assets that would provide a return on investment in the long-term rather than the short-term. Those purchases included tangible goods such as a household appliance, a vehicle, a piece of furniture, and long-term purchases including higher education acquired through a student loan. Those items should be conceptualized as a household investment provided by consumer credit. Consumers are better able to make such an investment without the constraints of their available money thanks to the availability of credit.

There is a parallel between businesses and an individual consumer, both make use of credit as a way to balance a temporary issue between expenses and income. This is especially important when a household faces an unexpected expense such as auto repairs, medical emergencies, and replacing a broken appliance. These issues – and more – cause immediate challenges in the budgets of consumers. Consumer credit allows a consumer to handle these deficits effectively.

string(14) "Privacy Center"

We use cookies to give you the best online experience. By agreeing you accept the use of cookies in accordance with our cookie policy.

Share This
%d bloggers like this: