When the COVID-19 pandemic reached America in March 2020, the longest economic expansion in U.S. history ended. Almost every part of the U.S. economy was affected as businesses were shut down or limited to operating at a quarter of what they had been before.
Many Americans experienced unemployment or significant financial loss. This dramatic decrease in income forced many of us to reevaluate our spending habits, it also changed how most of us look at credit scores and debt.
Covid-19 & Debt: The pandemic has changed everything
The pandemic has been truly beneficial for e-commerce because many people shifted their shopping habits from physical stores to online shopping. Interestingly, even though e-commerce sales increased 32% from 2019, most consumers are reporting that they are using their credit cards more conservatively than ever before. Many Americans even used their stimulus checks to pay down credit card balances!
Even though unemployment rates climbed, the average amount of personal debt has declined since the beginning of the pandemic. Credit scores have increased at a higher rate than last year, and credit utilization is at a record low.
While the process for taking out a personal loan hasn’t changed, the rate of borrowing money has gone down overall. Personal loans have decreased for individuals, and small businesses have turned to coronavirus hardship loans to weather the effects of the lockdowns.
One of the biggest financial downsides of the pandemic has been an increase in medical debt. While credit card debt is at a record low and people aren’t taking out personal loans, medical debt has ruined credit and strained living expenses for people who have had COVID-19. Medical debt spiked almost 6.5% in just one year!
But, with all this there is still hope. There are many debt programs out there that can help you with medical, credit card, or personal loan debt. There are programs through Government Aid, non-profits, etc, that help you deal with overburdened debt, whether through debt consolidation, bankruptcy, debt forgiveness, or other means. If you’re struggling with debt, see how Consumers Alliance can help you today!