Consumer Borrowing Must Stabilize, Say Economists

Online, October 25, 2010 (Newswire.com) - After a $10.6 billion gain in the amount of consumer borrowing for the month of January (borrowing reports for almost all of 2009 were negative), and a rosy forecast of a second positive month, loan borrowings for U.S. consumers and businesses declined instead in February. According to the Federal Reserve report on U.S. economic activity for the month of February, overall borrowings fell by $11.5 billion in February.

Find out if a signature loan is right for you. Signature loans are available in amounts from $10,000 to $250,000 and are also referred to as unsecured personal loans, unsecured loans and business loans.

Many consumers are still feeling unsure about the strength of the U.S. economy - with record unemployment levels, uncertainty in the banking sector remaining from the housing crisis and lower than usual consumer demand for goods and services - many consumers and businesses are simply holding off on making borrowing decisions until after the economy stabilizes. Federal Reserve Chairman Ben Bernanke commented that the economy seems to have stabilized and is growing again but that significant financial threats still remain. "We are far from being out of the woods," Bernanke told a business audience in Dallas on April 7th.

The fed chairman was referring to the fact that unemployment is higher now than at any point since the recession of the 1970s, with younger workers, usually the backbone of a consumer society - and who are more likely than any other demographic group to apply for signature loans, mortgages and other forms of credit experiencing higher rates of unemployment than ever. The average overall rate of unemployment, at 31 weeks, is at its highest level since the end of World War II and there were a total of 2.3 million unemployed college graduates in March 2010.

Consumers who would like to borrow are finding it harder and harder to get credit at banks, which are being pushed by regulators to tighten their lending standards, and it is easy to see why this is having a chilling effect on the confidence of potential borrowers and may are opting to defer signature loans or other credit options until after the economic recovery strengthens. Even credit cards companies are stiffening their approval procedures and even reducing the available credit that they extend to cardholders. The February credit weakness reflected a 13.6 percent drop in revolving loans, such as credit card debt, and a 1.6 percent decline in non-revolving loans, which include signature loans.

Economists and economic policy analysts are worried that unless consumer borrowing stabilizes, it could derail the recovery because it will lower consumer demand for goods and services in the larger economy.

Get pre-qualified for a signature loan of up to $250,000. Click here to learn more.