Understanding the Rise in Monthly Debt Payments: A Comprehensive Analysis

If you’re like most borrowers, you’ve likely noticed an increase in your monthly loan and credit card payments. According to Experian data, as of February 2024, the average amount consumers need to repay all of their monthly debt obligations has climbed to $1,225. This rise in payments spans across major types of loans—credit cards, auto loans, and mortgages—each seeing an increase of at least 8% since 2022. While inflation and rising interest rates play significant roles, there are additional factors at play for each type of debt.

Balances and Monthly Debt Payments Are Rising in Tandem

Experian’s consumer debt review earlier this year revealed that average balances are increasing for virtually every type of consumer debt. Naturally, this leads to higher monthly debt payments. Since 2020, the average car loan payment has grown by more than $100 to $644, average monthly credit card payments have increased by $50 to $202, and average monthly mortgage payments have surged by $370 to nearly $2,000.

Average Monthly Debt Payment

Here’s a breakdown of the average monthly payments over the past few years:

• Auto loans: $535 (2020), $555 (2021), $588 (2022), $630 (2023), $644 (2024)
• Credit cards: $152 (2020), $151 (2021), $172 (2022), $197 (2023), $202 (2024)
• Mortgages: $1,620 (2020), $1,657 (2021), $1,778 (2022), $1,934 (2023), $1,990 (2024)
• All monthly payments: $1,047 (2020), $1,051 (2021), $1,113 (2022), $1,197 (2023), $1,225 (2024)

Consumers with newer car loans and mortgages are more likely to have above-average monthly loan payments, while those with loans originated before 2021 are more likely to pay less than the current monthly average. A blend of higher purchase prices and higher interest rates has resulted in higher-than-average monthly payments for more recent borrowers. For instance, the average monthly payment for vehicle loans newly borrowed at the end of 2023 was $726—nearly $100 a month higher than the overall average monthly payment of $644.

Not all consumers carry every type of debt simultaneously. Roughly half of all credit card users carry an interest-bearing balance from month to month, according to the American Bankers Association. Not all homeowners have a mortgage, either. And although there are almost as many vehicles registered in the U.S. as there are people, just 62% of consumers have an auto loan in their credit file, according to Experian data.

Year-Over-Year Change in Average Monthly Debt Payment

Looking at average total monthly payments—the blend of payments varies for every consumer—the burden increased by 8% in 2023. Here’s a year-over-year breakdown:

• Auto loans: +1% (2019-2020), +4% (2020-2021), +6% (2021-2022), +7% (2022-2023)
• Credit cards: -14% (2019-2020), -1% (2020-2021), +14% (2021-2022), +15% (2022-2023)
• Mortgages: -3% (2019-2020), +2% (2020-2021), +7% (2021-2022), +9% (2022-2023)
• All total monthly payments: -6% (2019-2020), 0% (2020-2021), +6% (2021-2022), +8% (2022-2023)

Credit cards are the type of debt most sensitive to interest rate increases. This partly explains why monthly payments in that category have increased the most (15%) over the past year as credit card interest rates have climbed to all-time highs. Average auto loan and mortgage payments, while also up, are somewhat tempered by fixed-rate lending—in most cases at least. But anyone who’s shopped for a new car can attest to both fewer and more expensive choices in those markets since the pandemic.

Average Monthly Payments Are Higher in Tech-Driven States

A constellation of tech-heavy states including Colorado, Washington, D.C., Washington state, Maryland, and Virginia have monthly debt payments of at least $1,400, well above the $1,197 national average. This is possibly a function of higher real estate prices as well as higher incomes relative to the rest of the nation.

Average Monthly Payment Per Consumer in 2023

Meanwhile, the average total monthly payment per month is under $1,000 in only a handful of midwestern states and Mississippi.

Student Loans, Rent, and Other Monthly Payments Are Also Squeezing Consumers

For younger consumers, there’s additional financial pressure from monthly obligations such as student loans, rent, and utilities. This growing stack of monthly payments may be beginning to slow consumer spending. Without an increase in income, U.S. consumers will have less for future consumer spending.

Interest rate cuts, expected sometime in 2024, may not immediately result in relief for most consumers. However, lower rates may help consumers with good credit to better negotiate lower rates on financing or refinancing loans.

Fortunately, the labor market is still working to the advantage of many. Employment levels continue to increase, as well as average wage levels. Just as fewer vehicles and homes for sale meant rising prices in those markets, fewer workers in the coming years may mean higher wages as the market finds a new equilibrium.

At O1ne Mortgage, we understand the complexities of managing your monthly debt payments. Whether you’re looking to refinance your mortgage, secure a new auto loan, or manage your credit card debt, our team of experts is here to help. Call us today at 213-732-3074 for personalized mortgage services tailored to your needs. Let us help you navigate the financial landscape with confidence and ease.