Consumers have begun borrowing money again, as the U.S. economy continues to strengthen. However, a new report from Mintel has revealed that 31% of Americans are overwhelmed by debt and they feel as though they will never repay it all. Nearly half of Millennials (48%) are among those who possess this fear.
47% of consumers believe that taking on debt is always a bad decision despite 77% having some kind of debt. Additionally, over half (53%) of consumers agree the amount of debt they have impacts their daily lives.
Overall, nearly three in five (59%) consumers have secured debt and 61% have unsecured debt. Secured debt is largely comprised of mortgage debt, which 43% of Americans possess. Credit card debt makes up a large percentage of unsecured debt (46%) with Millennials being the most likely to carry this type of debt (71%). Further, while only 19% of Americans report having student loans, that number increases to 32% of Millennials.
A small portion of consumers already in debt have taken on more unsecured (10%) or secured (8%) debt over the past two years, the majority of which are Millennials. Since 2013, 14% of Millennials have more unsecured debt, while 12% have more secured debt.
“For many people, debt hangs heavy on their minds with over half feeling the amount of debt they have has a negative impact on their daily lives. This is most true of young people, especially Millennials, primarily because their debt is likely to be a greater percentage of their income,” said Robyn Kaiserman, financial services analyst at Mintel. “While they already carry more unsecured debt than any other generation, in part due to student loans, they are also likely to incur more secured debt as they age and enter the mortgage market. There is an excellent opportunity for lenders to step in and offer services to help Millennial borrowers meet their financial obligations and potentially avoid falling behind or defaulting on loans.”
75% of parents agree paying off debt is a primary financial goal
Parents (75%) are more likely than consumers overall (71%) to agree that paying off debt is their primary financial goal and are taking measures to accomplish it. One in five parents (21% versus 15% overall) have a strict budget in place to pay down debt each month, as well as a financial plan specifically designed to pay off their debt in a defined amount of time (19% versus 14% overall). U.S. parents are more proactive in monitoring their credit, as 92% know their credit score compared to 83% of consumers overall. Mintel research also shows that parents are more likely to be currently using a financial adviser (61%) than those without children under age 18 at home (42%).
Although 43% of parents agree they are overwhelmed by debt and will not be able to repay it all, they are more likely than consumers overall (50% versus 41%) to agree that debt can be a valuable tool. The majority of parents also agree that debt is necessary in today’s world (55% versus 42% overall). Nearly half of parents (48%) are also more comfortable taking on debt now than they have been in the past.
“The expense of raising children drives many Americans to take on debt but also makes it more difficult to pay that debt down. Mintel research indicates that, as a result, parents adjust their spending to better accommodate paying off debts, which is their primary financial goal. To accomplish this, parents are more willing than consumers overall to structure long term repayment plans and access financial advisers so they can effectively budget for their household,” continued Kaiserman.
Men and women don’t see eye to eye on credit
Men are generally more likely than women to believe that credit has a positive role to play in their lives. In fact, over half of men (52%) agree that they believe in using credit if it helps them get what they want (compared to 39% of women), with another 32% agreeing that as long as they have credit, they can afford anything they want (compared to 23% of women). The same trend is seen when comparing men’s and women’s perception of whether or not debt is necessary in today’s world (45% of men versus 39% of women).
Mintel research shows that credit scores increase with age among both men and women. However, men age 55 and older (65%) are much more likely than women of the same age (52%) to have a score of at least 720. At younger ages, women have the same or better credit scores than men; for example, 47% of both men and women age 35-54 have credit scores of at least 720. Overall, women are less likely than men to know their credit score. One quarter (25%) of women age 18-34 do not know their credit score, compared to 15% of men that age.
“Men are much more likely to view credit positively and, as Mintel research indicates, they actively monitor their credit scores. For men, more so than women, the idea that credit can help get them what they want is stronger than their hesitation to take on debt, making them an attractive audience for credit card companies and other lenders. As the economy continues to strengthen, consumers may become more comfortable with borrowing money and taking on debt,” concluded Kaiserman.