Latest Reports Show Optimism in Consumer Lending

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Denied creditConsumers are feeling pretty confident, according to the latest Federal Reserve credit numbers – and that means that more than ever, consumers are looking for the smart play when it comes to securing a loan.

The most recent April numbers on revolving credit debt – borrowing that’s typically tied to credit card use, not real estate transactions or student and car loans – was up 11.5 percent, at more than $8.6 billion. That’s the biggest rise in a year, one that signals to many economists that consumer spending is buoyed by other positive economic news on jobs and real estate, despite some setbacks reflected in global financial data. This latest data isn’t just good news for consumers who’ve been waiting to spend; it’s key to the U.S. recovery, as consumer spending is as much as 70 percent of our economic activity.

It’s an optimistic time, especially for people who remember how hard it was to get a loan a few years ago when so much money was frozen for even the most credit-worthy consumers .The economic recovery means that for many people jobs are back, their real estate investments are back, and it’s time to spend on new appliances, vacations and more.”

If you’re looking at consumer credit options, you’re not alone. About 37 percent of Americans applied for a loan last year, up from 31 percent in 2013, according to the 2014 Economic Well-Being of U.S. Households Report released in May. And 2 out of every 3 of those Americans applied for a credit card, with auto loans a distant second (26 percent) followed by student loans (13 percent) and mortgages.

The news isn’t just about consumers though – because on the other side of that ledger, there are lots of lenders now who want to say yes to your application. The best ideas for getting that “yes” include:

  • First answer the question, “What’s it for?” You may think you already know that you need money for medical services, for a business opportunity, for a professional wardrobe upgrade in a new job – but you only know which loan you need, if you plan for what that “what for” really means. You also need a realistic ROI assessment about your timeline for paying that loan off.
  • Research your options, especially when you’re looking to secure a personal loan. You want to be sure that you understand all of the products available to you, and what the advantages and the trade-offs are for each loan. For example, an entrepreneur looking to finance a startup or grow an existing business may have a range of options that include a loan from family members, or credit card financing, or a personal loan that’s designed to meet a specific short-term goal. In all cases, dive into those smart details – and you’ll get the smartest deal to go with that “yes,” too.
  • Make it as easy for the lender as you want it to be for you! Have all your documents available, make sure they’re complete, and prepare your answers ahead of time if you think there will be questions about your employment history, your credit score or other application information.

That’s especially true for consumers who want to take advantage of this big takeoff in consumer lending, and who don’t want to be left out because of a less-than-perfect history. About 16 percent of Americans were denied credit, got less than they wanted, or didn’t even try because they thought they’d be denied a loan if they applied, according to the 2014 Federal Reserve report. Of these consumers, about 2 in 5 turned to an alternative financial product – so understanding those loan opportunities is critical too.

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