This chart released quarterly by the Federal Reserve presents several learning opportunities:
Lesson 1: Mortgage debt far exceeds all other consumer debts with a total of $8.12 trillion as of the end of Q2 2015. The next closest, student loan debt, stood at $1.19 trillion or almost 1/8 the amount of mortgage debt.
Lesson 2: Secured debt, loans secured by property such as home mortgages or auto loans, carry lower interest rates than unsecured debts like credit cards. I did a quick set of Google searches to find average interest rates for largest consumer debt categories (see links for source documents):
- Mortgage Debt: Average interest rate of 3.81% as of 6/30/2015
- Student Loan debt: 5.5% (calculated by eyeballing this chart)
- Auto Loan debt: Calculated by using five year average of 5.1% (6.21% in 2010, 5.73% in 2011, 4.91% in 2012, 4.43% in 2013 and 4.24% in 2014). Could make the argument that recent years should be more heavily weighted which would have resulted in a lower rate
- Credit card debt: 13.29% interest as of May, 2015
Lesson 3: Over the past year, car loans are growing at the fastest rate ($101 billion increase) with student loans close behind (increased by $72 billion).
Lesson 4: Americans spend over $500 Billion/Year in interest on their major consumer debts. Here are the calculations (note that I rolled Home Equity Lines (HELOCs) into mortgages for simplicity purposes:
This could lead to a great discussion of good vs. bad debt….Enjoy!