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Concourse Lending Review : “Americans Don’t Know How To Save!”

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Concourse Lending Review: Americans Are Still Borrowing More Than They Should

The Concourse Lending Review was written to educate the public about the borrowing and savings habits of ordinary Americans over the last ten years. September of ’08 saw the economic dynamic of the whole world shift. Almost everybody felt the ground slip from underneath their feet as the markets froze. The biggest banks in the world saw themselves in a precarious position. The Government of the United States was shaken as well. There was a generation of deregulation, but it finally looked like the banking system in the country could become nationalized.

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The economic crisis has had a huge impact on the politics and economy of the whole world over the next 10 years. The rise of the Tea Party, anti-corporate theft, and the rise of Trump’s “Make America Great Again” movement was seen during this time. New regulations came forth. The banking industry became a more boring place, but it also became a lot more secure. Foreclosures became common practice. The retirement plans for a lot of old working-class people went belly up.

Considering the whole decade of economic crisis, it is surprising that the borrowing and savings habits of Americans have not improved. We’re still borrowing more money than we should. The settlement of consumer debt has become a major growth industry.

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The average household debt on Americans declined from ’08 to’13, but things have taken a 180 degree turn since then. $13.2 trillion is the amount of debt accumulated by the people of the country. This figure only represented the first quarter of 2018. This is a new all time high. While we’ve gotten better at managing obligations as a nation, the low interest rates for borrowing money, for a long period of time, can be blamed for this debt.  The crisis did nothing to teach us about the dangers of borrowing so much money.Concourse Lending Review Complaints

It also did nothing to teach us about the value of savings. From ’60 to ’84, the savings never fell below 8 percent. The personal savings rate right now is lower than 3 percent. That is the lowest ever in the history of the country.

A Federal Reserve survey, which had been discussed quite a lot, published vital information highlighting the problems. Over 30 percent of adults in the country said that they cannot pay all of their bills if they faced a $400 emergency in their lives. Considering that, the next time things go rough, it will be a lot worse than how things were in ’08.

Most of the problems a decade ago were covered in debt. Things right now seem to be leading to something similar; maybe even worse.

Concourse Lending Review Finds Americans Are Incapable of Saving

The aftermath of the financial crisis saw observers debating that Americans entered a new age of frugality. The lenders cannot rely on high interest rates any longer. It seemed like Americans were changing their habits of borrowing money initially. The survey conducted by the Consumer Federation of America in 2009 certainly suggested that. Almost half of all Americans were trying to pay back their debts. The number has dropped to below 40 percent according to the numbers from last year.

Right after the crisis, consumers all over the country were shell-shocked. Almost everybody was struggling with debt during those times. Those who didn’t definitely know of someone who did. After the shock of the crisis, when things started to get better, personal savings levels went as high up as 11 percent in ’12. That was nothing more than a temporary state of being. The lenders wrote down a lot of the consumer debt that year. This led to the rise in personal savings percentage in 2012.

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The post crisis time has seen the spending of all Americans increase with little to no regard to the aspect of savings. JPMorgan Chase Institute conducted two studies on the matter. The first one used consumer data obtained from the New York based banking giant. It showed over four thousand consumers with adjustable mortgage rates, which were reset to lower rates between April 2010 to December 2012. Over these two years, the credit card usage of consumers increased. There was such an increase that the mortgage savings were left behind by around 4 percent.

The second study was conducted using the habits of over 25 million credit card users of the Chase bank. The researchers found that people spent 80 percent of the money they saved on fuel costs, when the price of a gallon was a dollar lower than the year before it.

A lot of Americans do not understand that they need to keep a base level of spending that is lower than what they are earning. Americans are very bad with their finances in general. The stagnation of wages made it hard for families to save initially. This was especially the case for low income families. Higher education costs and housing costs made it worse. Consumer behavior can be attributed to the outside factors rather than the behavior itself. The consumer behavior has been reactive. With the advent of targeted marketing, retailers are having a ball. They are making more and more people spend a lot. Little or no effort is made to maintain a sense of frugality. There is no concept of savings in the country.

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Lenders and banks have also impacted the Concourse Lending Review behavior. The debt increase for vehicles rose by over 75 percent in the first quarter of 2010, based on the numbers by the Federal Reserve Bank in New York. After the crisis ended, a lot of people delayed on purchasing cars. It made sense. The increase of auto loans increased the available supply. This was noted by lenders who saw more people making good on their auto loans. They relaxed the standards and more people started taking auto loans post crisis.

The secured credit card market also showed the Concourse Lending Review that the financial industry was encouraging people to incur debts rather than encourage them to save money. These cards are made for people who cannot apply for the mainstream credit cards. This is why before getting the card, the consumers make a security deposit. That is supposed to be a way of saving money, but that’s not how it’s working. People who can actually benefit from them don’t even use the secure credit cards. You see, the issuers of credit cards barely market the secured credit cards. It’s not as profitable for them. This is why people who could use these secured credit cards opt to go to lenders who come at a high cost.

Concourse Lending Review Looks at Millenials

The recession was particularly difficult for people that were coming of age during the 2000s. The Concourse Lending Review showed that people graduating from college were bogged down with student debt, and the job market was more than just weak. It was dismal. People who couldn’t finish college were in a far worse position. They were competing for low wage jobs with people that were far more qualified than them. This has led to two narratives being formed about the financial crisis and millennials.

The first narrative is that they went through this crisis during their formative years. They are more aware of credit card debt than older people. Another survey e showed that only 60 percent of millennials had at least one credit card. In contrast, the baby boomers comprised of almost 90 percent of credit card holders. The Generation X had 80 percent of people with credit cards. There are several reasons to explain why millennials don’t have credit cards. The fact that they’re trying to come out of a financial hole means they don’t really qualify for a credit line. The younger people are less worthy of credit according to the standards for mainstream credit.

The second narrative which came along was that the millennials are less interested in owning homes compared to the previous generations. The reality is that the younger people have delayed making those major purchases, which the precious generation did at the same time. Young adults nowadays are still trying to pay off student loans. They find themselves living in cities for a longer time. That means they can rely more on public transport.

Mortgage standards have become stricter. Prices for homes are also getting higher. All of these factors make it less likely for the millennials to spend on cars and homes. It’s a lot harder for them to do so.TransUnion conducted a survey that showed that over 70 percent of the millennials who didn’t have mortgages planned to buy homes in the future. A lot of factors have come together to delay their spending on a lot of major things.

Concourse Lending Review Says Shift In Consumer Behavior is Debatable

Home equity is what saw the biggest impact on financial behavior in the country. Before the crisis, Americans saw their home equity as a means to speculate in real estate or for finance consumption. That’s not how things are now. Over 40 percent of people who tap into their home equity plans are using the funds to make improvements on their homes. That’s a percent less than people looking to use it to purchase investment properties. Americans saw their homes as a piggy bank before the crisis. The post crisis era is the exact opposite. It was a rude awakening for many American citizens.

The shift in consumer behavior after the recession is debatable. According to the Concourse Lending Review, whether the change in scenario is the fault of the consumers or the lenders, is still inconclusive. Currently, both factors are playing a role in consumer debt levels. The more important question to think of is whether the crisis has led Americans to not own their homes. Even a decade later, there is no answer to this question. Perhaps it is still too early to answer that.

From 2006 to 2016, home ownership, all over the country, fell by almost 6 percent. This meant that a lot of Americans couldn’t cope with their bubble era mortgages. The lending standards became stricter after the crisis, and the cost of single-family rental homes increased. Q1 of 2018 has seen home ownership increase up to 64 percent, which was the average for three decades—from ’65 to ’95.

Concourse Lending Review Looks Forward

The discussions about consumer debt in the country are leading up to the formation of yet another financial bubble. As of this moment, there is no immediate sign that there is another crisis coming. The delinquency rates for credit card debts are lower. Mortgage rates no longer rely on a bubble that the prices of the housing market will remain high. The strong labor market has seen to lower delinquency rates, and the household debt has been at an average level from ’90 to ’18.

The main concern is what will happen to the consumer debt levels? The interest rates will continue to rise. The future does look gloomier for the Americans. The ability to make good on the debts right now will fade away, and the next crisis will become more likely. This time, however, the recovery into a post-crisis era might be a long time coming.

 

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