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Consumer Attitudes Towards Debt - US - July 2014

Published By :

Mintel

Published Date : Jul 2014

Category :

Banking

No. of Pages : 129 Pages


Despite a recent increase in residential mortgage and auto vehicle lending, consumers remain cautious about taking on new loans, while lenders remain cautious about extending new credit. Consumers are particularly reluctant to borrow on their credit cards or against the equity in their homes to finance spending. At the same time, the explosive growth in student loans may prevent consumers from saving as much as they need for retirement.
Table of Content

Scope and Themes

What you need to know
Data sources
Consumer survey data
Direct marketing creative
Abbreviations and terms
Abbreviations
Terms

Executive Summary

Current economic environment
Consumers and household debt
The consumer and attitudes toward debt
Black consumers and debt
Marketing strategies
What we think

Issues and Insights

Social media can help lenders stem the drop in home equity lending
The issue
The implication
Figure 1: Types of debt in household – Secured debt, by visits social media websites daily, April 2014
Look further down the credit spectrum for debt customers
The issue
The implication
Frame debt-reduction services to minorities
The issue
The implication

Trend Application

Trend: Entrepreneurial Spirit
Trend: Help Me, Help Myself
Trend: Click and Connect

Current Economic Environment

Key points
The economy continues to recover at moderate pace
Figure 2: Quarterly change in GDP growth, 2008-14
Payrolls rise while unemployment rate falls
Figure 3: Nonfarm payrolls, 2009-14, in thousands
Figure 4: US unemployment rate, 2008-14
Consumer spending and GDP growth
Figure 5: Real personal consumption expenditures, Jan. 1, 2000-Nov. 1, 2013
Recovery in housing boosts household wealth
Figure 6: Case-Shiller 20-city home price index, 2006-14
Figure 7: Owners’ equity in residential real estate, in millions of dollars, 2005-13
Figure 8: Owners’ equity in residential real estate, in percent, 2005-13

Consumers and Household Debt

Key points
Total consumer loans outstanding rise nearly 4% after long decline
Figure 9: Total consumer loans outstanding, in trillions of dollars, 2003-14
Mortgage debt rises 3% but still down 12%
Figure 10: Total mortgage loans outstanding, in trillions of dollars, 2003-14
Mortgage growth forecast anticipates further decline
Figure 11: Residential mortgage originations, in trillions of dollars, 2000-14
Mortgage delinquency rate has dropped sharply
Figure 12: Mortgage loan 90-day delinquency percentage, 2003-2014
Home equity lines of credit have fallen by more than a quarter
Figure 13: Total home equity lines of credit outstanding, in trillions of dollars, 2003-14
HELOC delinquency remains far above historic norms
Figure 14: Home equity line of credit 90-day delinquency percentage, 2003-14
Credit card debt has dropped sharply as consumers switch to debit
Figure 15: Total credit card loans outstanding, in trillions of dollars, 2003-14
Credit card delinquency rate falls to more than 10-year low
Figure 16: Credit card loan 90-day delinquency percentage, 2003-14
Auto lending has picked up
Figure 17: Total auto vehicle loans outstanding, in trillions of dollars, 2003-14
Auto loan delinquency has declined to three-year low
Figure 18: Auto vehicle loan 90-day delinquency percentage, 2003-14
Student loan volume skyrockets
Figure 19: Total educational loans outstanding, in trillions of dollars, 2003-14
Student loan delinquency soars
Figure 20: Student loan 90-day delinquency percentage, 2003-14

Innovations and Innovators

Key points
Peer-to-peer lender SoFi helps student borrowers to refinance, find jobs
Wells revamps HELOCs to require principal payments
Credit scorer helps widen pool of eligible borrowers
Walmart adds receipt comparison tool to mobile app
Synchology, Social Money let companies offer a suite of mainstream financial products
Discover adds free FICO scores to monthly cardholder statements
Mobile phone app rewards users for saving and paying down debt
MoneyDesktop tool updates as financial goals are met
Capital One launches service to catch unwanted card charges
Credit card issuers extend 0% interest offers to nearly two years
Smartphone app makes it easier to transfer balances
Wells Fargo presents video series on paying for college

Marketing Strategies

Key points
Overview
Figure 21: Home Affordable Refinance Program from Quicken Loans direct mail ad, 2014
Figure 22: Home Equity Credit Line from Huntington National Bank, Direct mail ad, April 2014
Figure 23: Home Equity Lines of Credit from Royal Bank America direct mail ad, 2014
Figure 24: Equity-100 Program from NewDay Financial direct mail ad, April 2014
Figure 25: Simplicity Visa from Citibank direct mail ad, 2014
Figure 26: Slate Visa from Chase direct mail ad, 2014
Figure 27: Student Loan from SoFi Lending Corp direct mail ad, 2014
Figure 28: Smart Option Student Loan from Sallie Mae email ad, 2014
Figure 29: Automotive Sales from General Motors direct mail ad, 2014
Figure 30: Reverse Mortgage from TerraVista Mortgage, LP direct mail ad, 2014

Consumer Types of Debt in Household

Key points
Mortgages, auto loans are most common secured debts
Figure 31: Types of debt in household, April 2014
Age correlates with mortgages, but not auto loans
Figure 32: Types of Debt in Household – Secured debt, by age, April 2014
Highest earners most likely to have mortgages
Figure 33: Types of debt in household – Secured debt, by household income, April 2014
Blacks, Hispanics less likely to have mortgages
Figure 34: Types of debt in household – Secured debt, by race/Hispanic origin, April 2014
Urban dwellers least likely to have mortgages
Figure 35: Types of debt in household – Secured debt, by area, April 2014
Youngest most likely to have student loans
Figure 36: Types of debt in household – Unsecured debt, by age, April 2014
Student loan burden falls mostly on lowest incomes
Figure 37: Types of debt in household – Unsecured debt, by household income, April 2014
Blacks have more credit card, student debt
Figure 38: Types of debt in household – Unsecured debt, by race/Hispanic origin, April 2014
Credit scores correlate with having a mortgage
Figure 39: Types of debt in household – Secured debt, by credit score, April 2014
Lowest scored people most likely to have credit card, student loans
Figure 40: Types of debt in household – Unsecured debt, by credit score, April 2014

Consumer Household Financial Situation

Key points
Largest group of consumers has highest credit scores
Figure 41: Credit score, April 2014
Credit scores get better with age
Figure 42: Credit score, by age, April 2014
Credit scores rise with household income
Figure 43: Credit score, by household income, April 2014
Blacks tend to have lowest credit scores
Figure 44: Credit score, by race/Hispanic origin, April 2014
Higher credit scores in suburbs, rural areas
Figure 45: Credit score, by area, April 2014
Higher scores give borrowers more options
Figure 46: Credit score, by credit card activity and usage, April 2014
Lowest scored borrowers not unduly stressed about their debts
Figure 47: Credit score, by attitudes toward personal debt situation, April 2014
Highest scorers have more savings, better prepared for retirement
Figure 48: Credit score, by debt and the financial future of the household, April 2014
Student loans a big reason why many can’t save money
Figure 49: Credit score, by debt and the financial future of the household, April 2014
Most see no relief from debt in their lifetimes
Figure 50: Credit score, by debt and the financial future of the household, April 2014

Total Amount of Unsecured Debt

Key points
Largest percentage of consumers have less than $5,000 in unsecured debt
Figure 51: Amount of unsecured debt, April 2014
Youngest respondents have most unsecured debt, likely student loans
Figure 52: Amount of unsecured debt, by age, April 2014
Unsecured debt equals annual income for many low earners
Figure 53: Amount of unsecured debt, by household income, April 2014
Rural dwellers have more unsecured debt
Figure 54: Amount of unsecured debt, by area, April 2014
Many low-scored respondents have lots of unsecured debt
Figure 55: Amount of unsecured debt, by credit score, April 2014
Total amount of secured debt
Figure 56: Total amount of secured debt, April 2014
Incomes correlate with secured debt loads
Figure 57: Amount of secured debt, by household income, April 2014
Blacks have relatively less secured debt than Whites
Figure 58: Amount of secured debt, by Hispanic origin, April 2014
West, East coasts have biggest secured debts, due to home prices
Figure 59: Amount of secured debt, by region, April 2014

Credit Card Activity and Usage

Key points
Nearly half say they have reduced credit card debt
Figure 60: Credit card activity and usage – Credit card revolvers, April 2014
Ability to manage credit card debt improves with age
Figure 61: Credit card activity and usage – Credit card revolvers, by age, April 2014
Highest earners better able to reduce debt
Figure 62: Credit card activity and usage – Credit card revolvers, by household income, April 2014
Blacks, Hispanics falling behind in debt management
Figure 63: Credit card activity and usage – Credit card revolvers, by race/Hispanic origin, April 2014
Homeowners manage card debt better than renters
Figure 64: Credit card activity and usage – Credit card revolvers, by residence, April 2014
Higher credit scores mean less debt, more happiness
Figure 65: Credit card activity and usage – Credit card revolvers, by credit score, April 2014

Attitudes toward Personal Debt Situation

Key points
Respondents don’t stress on debt
Figure 66: Attitudes toward debt, April 2014
Debt worries decrease with age
Figure 67: Attitudes toward debt, by age, April 2014
Younger women more concerned than men about debt
Figure 68: Attitudes toward debt, by gender and age, April 2014
Income eases debt worries
Figure 69: Attitudes toward debt, by household income, April 2014
Debt burdens impact Blacks’ lives more; more Blacks are “underwater”
Figure 70: Attitudes toward debt, by race/Hispanic origin, April 2014
Homeowners in better debt shape than renters
Figure 71: Attitudes toward debt, by residence, April 2014
Higher credit scores mean more happiness about debt
Figure 72: Attitudes toward debt, by credit score, April 2014

Debt and the Financial Future of the Household

Key points
Retirement outlook looks bleak for most
Figure 73: Attitudes toward finances and retirement saving, April 2014
Student loans are still a burden to many approaching retirement
Figure 74: Attitudes toward finances and retirement saving, by age, April 2014
Retirement picture improves with income, but not a whole lot
Figure 75: Attitudes toward finances and retirement saving, by household income, April 2014
Blacks more unprepared for retirement, but optimistic about debt
Figure 76: Attitudes toward finances and retirement saving, by race/Hispanic origin, April 2014
Self-employed are better prepared than most
Figure 77: Attitudes toward finances and retirement saving, by employment, April 2014
Northeast, Midwest are best prepared for tomorrow
Figure 78: Attitudes toward finances and retirement saving, by region, April 2014
Homeowners way more prepared for the future than renters
Figure 79: Attitudes toward finances and retirement saving, by residence, April 2014
Respondents outside urban areas better prepared than city folks
Figure 80: Attitudes toward finances and retirement saving, by area, April 2014
Credit card debt holding down prospects for lower scored people
Figure 81: Attitudes toward finances and retirement saving, by credit score, April 2014

Interest in Debt Assistance

Key points
Switching to debit is most common way to reduce debt
Figure 82: Interest in debt-reduction products/services, April 2014
Men more willing than women to use prepaid cards
Figure 83: Interest in debt-reduction products/services – Have used, by gender, April 2014
Youngest most interested in debt-reduction tools
Figure 84: Interest in debt-reduction products/services – Have used, by age, April 2014
Lowest earners more interested in debt-reduction services
Figure 85: Interest in debt-reduction products/services – Have used, by household income, April 2014
Blacks, Hispanics more likely to seek debt help tools, switch to debit
Figure 86: Interest in debt-reduction products/services – Have used, by race/Hispanic origin, April 2014
Renters more inclined to use debt-reduction tools than homeowners
Figure 87: Interest in debt-reduction products/services – Have used, by Residence, April 2014
Low scorers more likely to seek services to reduce debt
Figure 88: Interest in debt-reduction products/services – Have used, by credit score, April 2014
Youngest group more inclined to try debt tools
Figure 89: Interest in debt-reduction products/services – Have not used but would be interested, by age, April 2014
Hispanics most interested in online budgeting tools, Blacks favor personal advice
Figure 90: Interest in debt-reduction products/services – Have not used but would be interested, by race/Hispanic origin, April 2014
Renters more likely to seek advice than homeowners
Figure 91: Interest in debt-reduction products/services – Have not used but would be interested, by residence, April 2014
Subprime borrowers most interested in debt management tools
Figure 92: Interest in debt-reduction products/services – Have not used but would be interested, by credit score, April 2014

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