Debt Discomfort Doesn’t Prevent Borrowing

Posted by Mike Smith :: October 5, 2007 @ 6:46 am

In the past, we’ve discussed how nearly half of Americans are concerned about their outstanding credit card debt. With teaser rates, high fees, minimum payment increases, and similar issues, it’s no wonder that such concern exists. A new study finds that these concerns don’t necessarily prevent consumers from borrowing.

As reported in a recent article, consumers who are categorized as the most uncomfortable with debt were also the majority of survey respondents who reported usually or always carrying a credit card balance or having a second mortgage. The article cites research from the Mediamark Research Inc. (MRI) Survey of the American Consumer. The researchers were reported to have grouped adults into four categories:

Balk the Bank: These consumers are very uncomfortable with borrowing money; essentially, they hate doing it.

On Someone Else’s Dime: Members of this segment are credit-reluctant in their attitudes. They don’t feel as strongly negative about borrowing as members of the” Balk the Bank” segment, but it does make them uncomfortable.

To Their Credit: These consumers are credit realists. They don’t necessarily like to borrow money, but it doesn’t make them uncomfortable to do so.

I.O.U.: Consumers in this category have the mindset of a credit enthusiast: They are not averse to borrowing, nor does borrowing increase their anxiety levels.

From these categories, you would probably guess that those most uncomfortable with borrowing money would be the least likely to do so. Surprisingly, the research reported the opposite to be true. A majority of respondents who usually or always carry a credit card balance (52.1%) and those who have a second mortgage (54%) were in the “Balk the Bank” category, despite their severe discomfort with borrowing money.

It may be that this discomfort with borrowing money comes from the fact that these particular people are forced to borrow money. They may see borrowing as the only solution to their financial issues. If this is the case, then it’s likely the burden of their debt that truly makes them uncomfortable, more so than their aversion to borrowing.

Regardless of the category that you would place yourself in, remember that there is an alternative to carrying a credit card balance, getting a second mortgage, or opening a home equity line of credit. As many other borrowers have discovered since May 24th, Lending Club P2P loans may be the affordable alternative to your current situation. Consolidating your debt and financing major purchases through Lending Club may not make you any more comfortable about borrowing money, but the lightening of your debt and the money you could save should at least help you to sleep better at night.