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Are We Getting Into Too Much Debt?

At America’s Loan Company we focus on consumers with less than stellar credit scores.  The “Bad Credit Personal Loans” is all over our website.  This does not mean that our loans are guaranteed regardless of credit score.  We have certain standards to follow.  Is just that, we are willing to loan to Ohio debt signsconsumers who may not be able to get a loan from a bank or credit union.  Historically, we have not found it difficult to find applicants with bad credit whom we felt were “acceptable risks.”  However, in the past two years we are finding it more difficult to find qualified applicants.  The underlying reason in our recent experience is that people are acquiring too much debt.  Here’s some of the negative trends we have noticed.

Personal Loans Are In Demand

So, what is some of the cause for the increase in personal debt?  Personal Loans have increased in popularity recently.  According to a TransUnion blog dated 6/1/18 by Matt Komos (follow this link to read this blog https://www.transunion.com/blog/consumer-credit-origination-balance-delinquency-trends-q1-2018) comparing first quarter of 2017 to the first quarter of 2018, Personal Loan debt rose by 7.8% among Subprime Borrowers. Credit card debt also rose 3.3% within that same group.  As Subprime Borrowers are the ones we tend to serve, the effects of this increase are evident.  Now we are seeing applicants debt on chalk boardwith debt to income ratios above 45%.  Debt to income ratio is calculated by taking the minimum monthly payment on debts divided by gross monthly income.  America’s Loan Company aims to be a responsible lender.  So once an applicant’s debt to income ratio reaches 45% it prevents the application from being approved.

To Make Matters More Difficult, No All Loan Companies Report To Credit Bureaus

Another somewhat invisible cause of increase in personal debt and dare I say it, defaults, are loans from companies that do not report to any credit bureau.  After applications are received and reviewed, documents are requested, such as bank statements.  Years ago we started doing this looking for any inordinate amount of non-sufficient fund (NSF) fees, which to us is a red flag.  However, now we not only look at NSF’s, we also look for lenders that appear on the bank statements.  It amazes us how often we find bank statements with four, five, six payday or title loan lenders as either depositing or debiting the bank accounts.  Payday lenders and Title Loan lenders do notheavy debt loadtypically report to the three major credit bureaus.  This is the reason for which we refer to these types of debts as “invisible.”  As these types of loans have loser underwriting standards, combine that with the rise in credit card and Personal Loan debt, it is our observation that consumers seem to be getting into more debt than they can handle.  We can no longer depend solely on credit reports to determine how much debt a person is responsible for.

It is our most recent experience that consumers seem to be acquiring more debt than they may be able to handle.  We don’t have a solution for that, except that consumers need to start treating debt as a “use only when needed” service.  Also, we believe lenders need to be more responsible, not only for the consumer’s sake but for their own also.  Too much debt can only end in credit default.  No lender likes financial loss and no customer likes receiving collection calls and having their credit scores negatively affected.  As a side note, for those consumers who are looking for ways to repair their credit you may visit this link with Top 20 Credit Repair blogs: https://blog.feedspot.com/credit_repair_blogs/

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