Personal loans are a popular way to take on debt in the U.S., and Whatcom County residents have robustly embraced them.
Whatcom County residents who have personal loans had an average balance of $32,672 at the end of 2018, according to a recent study done by Experian, an increase of $500 compared to a year earlier.
That average balance is well above the U.S. average balance of $15,143 and also above the Washington state average of $27,295. The Washington average balance topped all other U.S. states, according to the report.
Plenty of cities have much higher personal loan balances. Manhasset, NY, topped the list at $232,877, while two California communities were in the top 5 with balances in the $120,000 range. The study also noted that the average annual income was $147,586 for the 10 cities with the highest average personal loan balances.
Cudahy, Calif., had the lowest personal loan balance at $3,360.
In its study, Experian noted that personal loans continue to be the fastest growing consumer debt in the past year, rising 11.9 percent to $291 billion. Credit card debt rose 5.9 percent while student loan debt was up 5.8 percent.
Personal loans are used for a variety of ways by consumers, including debt consolidation. For this study, home equity lines of credit were not considered personal loans. The authors of the report said personal loans were once often considered a last option, but that sentiment has changed over the years as interest rates for those loans have dropped and more options have become available. The study also speculated that Americans are taking on more debt because they are feeling confident about a steady economy amid low unemployment rates.
Not only are there more options, but they are easier to use because companies are doing a good job targeting and streamlining the process, said James McCafferty, co-director at the Center for Economic and Business Research at Western Washington University. While people may do better moving higher-interest debt into a personal loan, there’s a danger of taking on even more debt if spending cutbacks aren’t made.
“Unfortunately, for many people after doing this (consolidating debt) they also re-incur the revolving debt which causes the cycle again,” McCafferty said in an email.
Rising consumer debt in itself does not give a clear picture on what that means in the economy, said Hart Hodges, co-director at Western business research center. Debt increases can be fine for the economy if income is also increasing, he said in an email.
Wages have been trending higher in Whatcom County and the U.S. The latest data shows Whatcom’s average weekly wage was $908 during the second quarter of 2018, a 3.8 percent increase compared to the 2017 average, according to data from the state’s Employment Security Department.