Consumer Borrowing Hits Five-Year High

Strong demand for new cars has boosted consumer borrowing to its highest level since 2008, according to a new report from Equifax.

In its latest study on consumer credit trends, Equifax said that consumers took $141 billion of new loans in the first two months of this year, up 12% from the same period on 2012 and 33% from three years earlier, when borrowing hit a recession-era low. Automobile loans, which rose 13% year over year, to $70 billion, accounted for nearly half of the total, according to Equifax.

"On a year-to-date basis, auto loan origination activity is the strongest it has been for banks since Equifax began tracking this information in 2006 … and the second strongest showing for nonbank auto financing companies," said Amy Crews Cutts, the chief economist at Equifax. "Consumers are tired of their old patched-up cars and demand is really starting to pick up."

Demand for student and home-equity loans also rose substantially in the first two months of the year. Lenders originated $11.7 billion of student loans in January and February, up 27% from a year earlier, and $12.4 billion of home-equity lines of credit, up nearly 16% year over year.

In a news release, Crews Cutts said that student borrowing is rising at well above the levels of tuition increases, raising concerns about how the loans will be repaid. "In the past, some students might have relied on their parents who would have funded tuition payments using home equity lines of credit, but the small volume of home-equity lending that is occurring today … is not sufficient to cover those costs," she said.

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