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Consumer Attitudes toward Debt - US - July 2015

Published By :

Mintel

Published Date : Jul 2015

Category :

Banking

No. of Pages : N/A

Consumers have begun to borrow again and banks have begun to lend. This is likely to continue as the economy strengthens, unemployment continues to decline, and interest rates stay low. As loan demand grows, however, the industry is facing disruption by P2P (peer-to-peer) lenders that match borrowers and investors, cutting out the bank in the process. While these new lenders currently have a very small percentage of the market, their growth has been extraordinary over a very short time, and the online nature of their business makes them appealing to Millennials and iGen and a future challenge to traditional lenders.

Overview

What you need to know
Definitions

Executive Summary

The issues
Consumers are uncomfortable with the amount of debt they are carrying
Figure 1: Attitudes toward debt, by generation, April 2015
Peer-to-peer lending is disrupting the industry
Most people don’t have a solid plan to repay their loans
Figure 2: Have a repayment plan, April 2015
The opportunities
Simplify the lending experience
Figure 3: QuickenLoan “Simplicity” mortgage email, 2015
Online and mobile debt management tools
Figure 4: Interest in debt management tools, April 2015
Increased comfort level with debt
Figure 5: Attitudes toward credit and debt, by generation, April 2015
Consumers with imperfect credit scores
Figure 6: Credit score, by attitudes toward credit and debt, April 2015
What it means

The Market – What You Need to Know

Consumer debt is inching up again
Less demand for loans
Credit card balances are lower
The economy is strengthening

Market Size

Total amount of consumer debt
Figure 7: Total consumer debt, Q1 2003-Q1 2015
Loan demand is still increasing, but at a slower rate
Figure 8: Number of loan inquiries, number of loans opened and closed within past 12 months, Q1 2010-Q1 2015

Market Breakdown

Total debt is inching up again – but components are changing
Figure 9: Components of US consumer debt, Q1 2010-Q1 2015
Mortgage debt still the largest portion of total consumer debt
Figure 10: Total US mortgage debt, Q1 2003-Q1 2015
Credit card debt is declining
Figure 11: US credit card debt, Q1 2003-Q1 2015
Auto loans are slowly growing
Figure 12: US auto loan debt, Q1 2003-Q1 2015
Student loan debt reaching new highs
Figure 13: Total US student loan debt, Q1 2003-Q1 2015
Delinquency Rates
Figure 14: Percentage of balances that are 90+ days delinquent, by loan type, Q1 2005-Q1 2015

Market Perspective

A drop in the number of those with large loan balances
Figure 15: Change in secured and unsecured loan balances, April 2014 vs April 2015

Market Factors

The economy is getting back on track
Figure 16: Quarterly change in GDP growth, Q1 2010-Q1 2015
New car sales are expected to increase, although at a slower rate
Figure 17: Total US unit sales and forecast of new cars, 2009-19
Personal disposable income and personal consumption expenditures are increasing
Figure 18: Real disposable income and real personal consumption expenditures, 2000-14

Key Players – What You Need to Know

Peer-to-peer lending is increasingly becoming a force
Most have no clear plan to repay their debt
Goldman Sachs is entering the consumer loan market

What’s Working?

Peer-to-peer lending is growing…and changing
LendingClub
Prosper

What’s Struggling?

Consumers are bothered by their debt, but have no repayment plan
Figure 19: Whether debt has an impact on lives and repayment plans, April 2015

What’s Next?

Goldman Sachs is entering the personal lending market

The Consumer – What You Need to Know

Most consumers have secured debt
Unsecured debt most popular among Millennials
Most don’t have a plan to repay debt
Debt’s impact on lives
Desire for online and/or mobile debt management tools

Debt – What Kind and How Much?

Secured debt balances are more than $100K
Figure 20: Type of secured debt held, by generation, April 2015
Most popular types of unsecured debt – and who holds it
Figure 21: Type of unsecured debt held, by generation, April 2015
Figure 22: Discover and Wells Fargo student loan email ads, 2015
Blacks and Hispanics have more unsecured debt
Figure 23: Ownership of secured and unsecured debt, by Hispanic origin and race, April 2015
Millennials are most likely to be taking on more debt
Figure 24: Percentage with more debt than two years ago, by generation, April 2015

Credit Scores Still Matter

Gender and age affect credit scores
Figure 25: Credit scores, by gender and age, April 2015
Hispanics and Blacks tend to have lowest scores
Figure 26: Credit scores, by Hispanic origin and race, April 2015
Age, education, and income are primary drivers of high credit scores
Figure 27: Key drivers of credit score of 720 or above, April 2015

What the Debt is For

Auto loans are most popular
Figure 28: Most recent use of loan, by age, April 2015
Hispanics are more likely to have recently taken loans
Figure 29: Most recent use of loan, by Hispanic origin, April 2015
Acceptable uses of credit
Unacceptable uses of credit

Attitudes toward Credit and Debt

Men feel more positively toward debt
Figure 30: Attitudes toward debt, by gender, April 2015
Is debt necessary in today’s world?
Debt affects iGen and Millennials the most
Figure 31: Attitudes toward debt, by generation, April 2015
Those with low credit scores are comfortable with debt, too
Figure 32: Attitudes toward debt, by credit score, April 2015
Figure 33: Milestone and First Premier subprime credit card email ads, 2015
Many Hispanics are worried about their debt
Figure 34: Attitudes toward debt, by Hispanic origin, April 2015
Not everyone thinks debt is a good idea
Figure 35: Capital One direct mail ad, Citibank direct mail ad, 2015
Figure 36: Attitudes toward debt, by gender and age, and Hispanic origin, April 2015
What credit means to consumers

Debt Repayment is Not Planned

Most don’t have a repayment plan
Figure 37: Have a repayment plan, April 2015
Parents are more likely to have a plan
Figure 38: Have a repayment plan, by parental status, April 2015

How People Pay Off Debt

Millennials are most likely to only pay the minimum due
Figure 39: Debt repayment practices, by generation, April 2015
Parents adjust their spending to pay down debt
Figure 40: Debt repayment practices, by parental status, April 2015

Debt Management Tools

Not many want help – but if they do, they want online help
Figure 41: Interest in debt management tools, April 2015
Young people’s preferences are strong
Figure 42: Interest in debt management tools, by generation, April 2015
Hispanics have more interest in debt management tools
Figure 43: Interest in debt management tools, by Hispanic origin, April 2015
Use of Credit and Its Impact
How people decide whether – and how – to use credit
Figure 44: Whether debt impacts lives, by demographic factors, April 2015

Appendix – Data Sources and Abbreviations

Data sources
Market data
Consumer survey data
Consumer qualitative research
Direct marketing creative
Abbreviations and terms
Abbreviations
Terms

Appendix – Key Driver Analysis

Methodology

Appendix – Consumer Repertoire Analysis

Type of debt held
Figure 45: Type of secured debt held, by repertoire groups, April 2015
Figure 46: Type of unsecured debt held, by repertoire groups, April 2015
How much debt do they have?
Figure 47: Total amount of secured debt, by repertoire group, April 2015
Figure 48: Total amount of unsecured debt, by repertoire group, April 2015
Credit scores
Figure 49: Credit scores, by repertoire group, April 2015
What the debt is for
Figure 50: Most recent use of loan, by repertoire group, April 2015
Debt repayment
Figure 51: Have a payment plan, by repertoire group, April 2015
Attitudes toward credit and debt
Figure 52: Attitudes toward credit and debt, by repertoire group, April 2015
Interest in debt management tools
Figure 53: Interest in debt management tools, by repertoire group, April 2015

Appendix – Consumer Tables

Source of loans
Figure 54: Source of loans, by demographics, November 2013-December 2014
Loan source: Commercial banks
Figure 55: Type of loans from commercial bank, November 2013-December 2014
Source of Loan: Savings bank/Savings and loan
Figure 56: Type of loans from savings bank/savings and loan, November 2013-December 2014
Source of Loan: Credit union
Figure 57: Type of loans from commercial bank, November 2013-December 2014
Source of Loan: Other
Figure 58: Type of loans from other types of firms, November 2013-December 2014

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