An increasing amount of Americans are not only taking out loans, they are becoming more and more aware of the benefits for keeping on top of their re- payments. Knowing the pros and cons of the financial agreement that a borrower is signing is vital to forecast how they will manage their debt over time. One of the biggest forms of loans in the U.S. in 2015 was mortgages taken out by people for buying a family home. As a matter of fact 56% of all the housing units in America are owned by its tenants. This accounts for a huge amount of financing on banks and other lenders, and a great deal of committed planning by the borrowers in order to pay this off.
This article expands on, not only how and how many borrowers pay off their loans, but also explores the situations where they manage to keep up with their payments in line with their financial agreement. In some cases, the financial planning of borrowers even makes it possible to pay off their debt well ahead of time, reducing the overall amount they have to pay back.
Recent data collected by the American Community Survey has shown that out of the 56% of American tenants who own their residential buildings (houses, apartments, flats etc) about a third of them had no mortgage left to pay. According to the same study, about 10% of the remaining two thirds of people who had an outstanding mortgage, had less than 20% of the total finance to pay off.
Although, the majority of home- owners had less than 50% of the mortgage to pay off, 30% of all borrowers had more than 70% of the payments to make. According to data experts, this shows a healthy balance in the mortgage market as the majority of home- owners have successfully paid most of their payments, yet there is a sizeable portion of borrowers who will keep paying into the system.
Some home- owners, however, plan well ahead to pay off the entire mortgage earlier than the original agreement. This would, over the course of the financial contract, save a great deal of money and shave off years of payments, possibly even decades. An independent, publisher and comparison service company based in the U.S. conducted a study in 2015 that showed that a small portion of mortgagors intended to pay off their dues sooner than they had agreed to with their financers.
For this the borrowers usually took out a 30 year mortgage however, they kept augmenting their premiums with additional payments from a second income. This would, in essence, reduce their mortgage duration by an average of a decade. A 30 year finance option is selected because it usually offers the mortgagor the flexibility to reduce the length of the contract by paying more, without any penalties.
Credit Card Repayments:
This section of loan repayments in the U.S. is particularly complicated. Data collected by Gallup in 2016 shows that about 70% of American adults have credit cards and about a third of credit card holders have more than one. The mean debt taken out by a borrower per credit card in the U.S. is about $5,700 as reported by the Survey of Consumer Finances report conducted by the U.S. Federal Reserve. This number has been increasing steadily over the past few years, however contrary to this trend; fewer people are defaulting on their premiums. A study conducted by The American Bankers Association reported credit card accounts that were 30 or more days past due dipped slightly to 4.18% recently.
This indicates a better understanding of the credit card system and planning for payment of premiums. This trend also suggests a better lending criteria set out by credit card issuers and improvements made in their screening. These points have been substantiated by FICO, a leading data analytics company that specializes in credit card loans. According to them, the average FICO score of a credit card user has been improving slightly year on year from 695 in the beginning of 2015 to 699 at the end of 2016. The higher the FICO score, the better the borrower’s credit rating and is more likely to secure a loan from a lender.
This, and similar scoring systems are used by financial institutions to gauge the ability of a borrower to make their due payments on time. According to the Census Bureaus’ 2012 Statistical Abstract, there was an average of 1,170,000 filings of bankruptcy annually. However, it can be contrasted according to the U.S. Bankruptcy Courts where there were a greatly reduced 844,495 filings in 2015.
The Boston Fed’s recent study on the credit industry showed that about 35% of Americans paid their premiums completely off every month. With the increasing availability of credit, the lure of taking out a loan seems too big to ignore. However, according to the numbers, the public seems to be keeping on top of their awareness about taking out credit.