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Consumer Debt Keeps Growing Amid Signs of Potential Problems On The Horizon

Consumers are taking on a lot more debt and the amount they owe compared to the salaries they are making continues to increase as well, according to data released last week by LendingTree.

LendingTree predicts that the amount of consumer debt will top $4 trillion by the end of 2018.

The amount of debt that is owed by consumers relative to their incomes is also on the rise. Consumers owe 26% of their income on consumer debt, up from 22% in 2010, according to LendingTree, which is a sign that individuals may have a tougher time making their debt payments going forward.

The type of debt being incurred by consumers is also a potential sign of trouble, LendingTree noted.

However, the primary difference in the past few years is how Americans borrow. When comparing the growth in mortgage-related debt to other types of debt (like credit card debt and auto loans), the latter is growing at more than 7 percent annually, while housing-related debt has grown at an annual rate of a little more than 2 percent. Growth in consumer debt can cause greater strain on personal finances; it enables spending on consumables and depreciating assets like cars, rather than traditionally appreciating assets like a home.

 

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