Alternative credit outlets surpass cards, adding billions to U.S. debt

Alternative credit lenders are growing in popularity over traditional credit card companies according to a report by the Associated Press. As new technology emerges, the debt collection and short term lending industries may see a boost due to better accessibility of such funds to consumers with lower credit scores.

The AP says the $14.6 billion added to American consumer debt in December 2012 was completely reliant on advances taken out for educational costs and automobile purchases. In contrast, the source states consumers are not willing to spend borrowed money for everyday purchases, meaning sales overall should not see any spike this year. Credit card allowance statistics show debt collection companies are working effectively at this time - national debt dropped by $3.6 billion, the AP says.

Global Insight's financial economics director Paul Edelstein told the source the job crisis and new hits to workers' pockets are reasons for Americans to pay for as much as possible in cash or through debit accounts.

"High unemployment and the increase in payroll taxes will leave households reluctant to run up big credit card balances," he told the AP. "An unwillingness to take on this form of debt will limit the speed at which consumer spending will grow this year."

One auto loan business' technological advances suggest that the availability of loans to people who may have credit scores too low for big card companies is rising. Not only is the organization making more approvals than bigger credit businesses, but their credit score generator should help consumers with poor credit better manage their funds.

The announcement by the auto loan financing company implies there is hope for those with little credit history or poor ratings, as they may be able to build better credit with loans facilitated by the new calculation software.