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After two years of relative frugality caused by the financial crisis, Americans are again borrowing in a big way. Credit card debt is spiraling upwards, car loans are fueling big sales in Detroit and even stock market investors are loading up on debt.

A series of data releases about consumer borrowing this week paints a picture of an economy that's rebounding smartly from its earlier doldrums. But have consumers learned any lessons about loading up on the red ink?

According to the Federal Reserve, outstanding consumer revolving debt, which is mainly credit cards, increased from $807.2 billion in November to $826.6 billion in December, a 2.5% increase in a single month. Outstanding nonrevolving debt, such as auto loans, rose from $1.608 trillion in November to $1.611 trillion in December. Automakers have reported a sharp increase in sales in the fourth quarter, with Detroit taking the lion's share of the jump.

The New York Stock Exchange released data showing that margin credit -- money investors borrow to buy shares -- increased to $276 billion in December, up from $233 billion at the start of the year. That reflects a sharply higher stock market but also an increased appetite for borrowing.

Combined, the two reports raise a key question: Is America releverging?

"Not Grounded in Reality"

The increase in monthly credit card outstanding balances was the first reported rise in 27 months. But Odysseas Papadimitriou, CEO of Evolution Finance, which publishes a credit card comparison site called cardhub.com, says the Fed's figures may significantly underestimate the actual increase in borrowing.

That's because the Fed include charge-offs of credit card debt that consumers can't pay. Assuming charge-offs were around $5 billion in December, Papadimitriou says outstanding debt may have grown by $25 billion instead of $19.6 billion, 20% more than the Fed reported.

"There is a segment of the population whose expectations are not grounded in reality," Papadimitriou says. "They think their spending can go back to pre-recession levels, when in fact the housing bubble was responsible for allowing them to have that level of spending."

Nonetheless, Adam Levin, chairman of credit-counseling website credit.com says he has detected a new sense of frugality among consumers.

In a poll credit.com conducted last month, when asked how they intended to deal with their holiday debt, 60% of respondents said they are planning to pay the debt in full, 13% said they would carry a credit card balance and 26% said they came out of the holidays with no debt. Last year, only 45% said they intended to pay off their debt in full.

"A New Sense of Frugality"

"People were feeling better and spent, but they were a bit more frugal," Levin says. "That could be because they were forced to banks shut down a lot of accounts and raised credit limits because they are fearful of what may be an uncertain economy or because there is a new sense of frugality basically branded into us, based on what we have lived through in the past few years."

Levin says credit card solicitations were much higher this year than last year, but they were mainly aimed at consumers with high credit scores.

However, another Fed survey does show a loosening of credit, saying "banks again reported an increased willingness to make consumer installment loans, and a small net fraction of respondents reported easing standards for approving consumer credit card applications."

While consumer spending is great for the economy, is increased borrowing good for the consumer? It is -- if it's done prudently, within one's income limits. But it will lead to only more trouble if new borrowings are being used to fund purchases that can't be easily paid off.

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TV ads promising extra money each month through an auto loan modification may be tempting, but be wary of scams, warns the Delaware chapter of the Better Business Bureau.

"Auto loan modification companies are following in the footsteps of unscrupulous mortgage modification companies which have long targeted struggling families who are just trying to stay above water," Delaware chapter president Christine Sauers said. "Some companies may make it look like they are tossing out a life preserver, but they end up pulling many borrowers deeper underwater."

Manheim, an international reseller of vehicles, says in its used car report that 1.9 million vehicles were repossessed in 2009; it expects that rate to drop slightly in 2010.

BBB has complaints nationwide against one Florida-based company, Auto Relief Group. Some consumers allege they paid hundreds of dollars in upfront fees to get their monthly payments reduced, but that didn't happen. That same company has been sued by the Florida attorney general's office.

Before you enlist the services of an auto loan modification company, the BBB recommends that you:

Start with the lender and see if a more convenient payment plan is available.
Check out the company with the local BBB chapter which can tell you if there are any complaints, government actions or lawsuits against the business.
Ask about advance fees. Some states don't allow companies to charge upfront fees for financial services and requiring money first should be a red flag even if the company offers a money-back guarantee.
Get the deal in writing and make sure the company tells you what its services are and its terms including refund policies.

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The fallout from the 2008 financial crisis still plagues would-be borrowers. Banks are still being pretty stingy about extending credit these days. Credit cards aren't nearly as easy to get as they were a few years ago. And ordinary folks are finding that only borrowers with high credit scores are being considered for a mortgage.

But there's one big exception, and it may be having a big effect on the economy: auto loans.

U.S. auto sales haven't yet returned to their pre-recession highs, but they've been surprisingly strong. Total sales of "light vehicles" -- cars, pickups, and SUVs -- were up 14.8% in the first half of 2012, and they're still picking up steam.

But what's driving it? After all, unemployment remains high, and many people who are employed have seen their earnings decline. Lots of folks have seen their credit ratings dented. It can't be easy for all those people to be buying new cars, can it?

Maybe it can be that easy for those with roughed-up credit to buy a car.

Subprime Loans Driving Auto Sales

It turns out that auto lending is one place where the banks are willing to be a little loose -- maybe even more than a little relaxed about lending standards.

New auto loans from banks totaled $47.5 billion in the first quarter of 2012. According to credit bureau Equifax, that's a seven-year high. Automotive finance companies added another $52.5 billion, says Equifax, up 49% from three years ago.

A lot of those loans are subprime loans.

A recent report from financial data firm Experian shows that the percentage of new auto loans going to subprime borrowers -- people with credit scores below about 680 -- has increased significantly in the last year, just as auto sales have taken off.

Some automakers are benefiting more from this than others. The Detroit News reported recently that Chrysler, whose sales were up a whopping 30% in the first half of 2012, has a special relationship with an arm of Spanish bank Santander (SAN) that specializes in subprime lending. That, experts say, has probably been a key contributor to Chrysler's recent success.

Is It Time to Worry?

Not necessarily. For one thing, default rates on auto loans are lower than they have been in years -- even as the percentage of loans going to subprime borrowers has risen. And defaults on auto loans tend to be less common than defaults on mortgages in general, probably because it's so easy for a lender to repossess a car -- and so hard for many people to get by without one.

And finally, this rise in subprime lending may just be a feature of the times we live in.

Many people had top-notch credit for years but because of the tough economy, have seen their credit dinged by unavoidable circumstances. Now that they're back on their feet, those people are probably still pretty good candidates for a loan. If banks are now starting to see that, it's probably a good thing.

At the time of publication, Motley Fool contributor John Rosevear owned shares of Ford and General Motors. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors and have recommended creating a synthetic long position in Ford.

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WASHINGTON (AP) - U.S. consumers borrowed more in November to buy cars and attend school, but stayed cautious with their credit cards.

The Federal Reserve said Tuesday that consumers increased their borrowing in November by $16 billion from October to a seasonally adjusted record of $2.77 trillion.

Borrowing that covers autos and student loans increased $15.2 billion. A category that measures credit card debt rose just $817 million.

The sharp difference in the borrowing gains illustrates a broader trend that began after the Great Recession. Four years ago, Americans carried $1.03 trillion in credit card debt, an all-time high. In November, that figure was 16.5 percent lower.

At the same time, student loan debt has increased dramatically. The category that includes auto and student loans is 22.8 percent higher than in July 2008. Many Americans who have lost jobs have gone back to school to get training for new careers.

The November increase also reflected further gains in auto sales, which grew 13.4 percent in 2012 to top 14 million units for the first time in five years. The need to replace vehicles destroyed by Superstorm Sandy may have also contributed to the gain.

Consumer spending rebounded in November, helped by lower gas prices and solid job growth that carried over into December. Employers added 155,000 jobs in December and 161,000 in November.

Steady hiring may have encouraged consumers to keep borrowing and spending, despite tense negotiations to resolve the fiscal cliff.

Still, some analysts expect borrowing and spending may have slowed in December as those budget talks in Washington intensified. Congress and the White House didn't reach a deal to avert sharp tax increases until Jan. 1. And they delayed tougher decisions about spending cuts for another two months.

Consumer confidence fell in both November and December, which may slow spending in December. Consumer spending drives roughly 70 percent of economic activity.

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The ongoing debate surrounding America's looming debt ceiling is big news inside the Beltway and in the press, but for many of us, even the phrase "debt ceiling" sounds too far removed from daily life to be of much interest. But ignoring this latest political battle would be a mistake: How the government handles the nation's debt limit will directly affect our personal finances in all sorts of important ways.

Before we dive into how all this could hit your wallet, here's a quick refresher course on the issue. Like every other country on Earth, America borrows money to pay for its services. But legally, there's a limit to how much money the federal government can borrow. Congress holds the purse strings: If more borrowing is needed, they have to approve it. Every time we've bumped up against that ceiling in the past, the legislative branch has simply increased the nation's credit limit.

Our problem right now is that the United States is only a few billion dollars from reaching its $14.294 trillion debt limit, and our elected officials aren't ready pick the simplest choice, the one that past Congresses have made. This time: There's debate. Should they raise the debt ceiling in order to borrow more money? Or do they hold the line and start either defaulting on our debts or stop paying for other government outlays -- military and civil service salaries, for example? Do they cut federal spending, and if so, to which programs? Or do they raise taxes?

Yes, our taxes are tied to the debt ceiling. As long as our country is under its debt limit, it can easily borrow money by selling Treasury bonds. As Stan Collender, a partner at Qorvis Communications, explains, "given that the government currently only raises taxes to cover 60% of what it spends, being able to borrow means that the services people depend on from the government continue." If America hits its debt ceiling, that option would be off the table. In such a scenario, the government would have to raise taxes to fund the shortfall, cut services, reduce its payroll, or do all three.

An Expensive Gamble on Many Levels

But individual Americans also will be directly affected by this when it comes to our own consumer debt. As noted before, America raises money by selling debt in the from of Treasury bonds, the government's version of an IOU. Someone -- you, me, China, my grandma, China, a college endowment, a hedge fund, China (yes, China buys a lot of them) -- purchases a T-bill, and the American government promises to redeem the bond at some later date, paying the buyer back with a bit of interest.

As long as bond buyers feel confident that America will always be willing and able to repay them, they tolerate low interest rates. Zero risk, small reward. But if the world starts to get nervous about America's ability to repay, the markets will demand a higher interest rate on our bonds before they're willing to buy them -- and because the nation relies on borrowing for cash flow even during good times, if Uncle Sam can't find buyers for those bonds at low rates, it will have to offer higher ones. Because it's our tax dollars that are used to pay that interest, higher interest rates eventually will have to covered by us in the form of higher taxes.

And what might make bond buyers edgy and demanding? The possibility that the government might default -- not pay all of its borrowers back -- which is precisely what could happen if we hit the debt ceiling.

So, America inches toward its debt limit, and bond rates start going up. The interest rates on our car loans, our mortgage loans, our student loans, and our credit cards, to name a few, are tied to bond rates. So if bond rates increase, the interest rates on our personal debt also goes up.

Beware of Falling Dollars

As if increased taxes and higher interest rates isn't bad enough, we could also see an increase in the cost of numerous everyday items, including gas, clothes, electronics, and anything else produced overseas. If the United States starts looking like it can't repay its debts, the value of the American dollar decreases. If the dollar weakens, foreign goods become more expensive.

This is, of course, all speculative at this point.

"We don't know what will happen because this hasn't happened before," says Collender. "But if the debt ceiling isn't raised and the government runs out of cash, at some point the president may decide he has to stop doing certain things, like paying government contractors, for example. That may not sound like such a big deal, but it is if someone in your family, or someone you know, is working for that contractor, or for the supplier of that contractor, or if that contractor is a big employer in your neighborhood or your state."

It also matters because all the parts of our economy are intricately intertwined, like a woven basket where each reed relies upon the next for support. Say the government postpones payments to a contractor. That contractor may decide to hold off on that new ad campaign it had planned to launch. Now, people working in the advertising industry, and maybe the newspapers and television channels that rely on advertising dollars, start to feel the pinch, and so those people decide to start saving more and spending less, in case the economy takes a downturn. Because consumers are now spending less money, stores start seeing a decrease in sales, and respond by reducing employees' hours or even engaging in outright layoffs. And it spirals downward from there.

None of this is very encouraging, which is all the more reason we need to stay alert to how our Congressional representatives handle the debt ceiling issue.

You can learn more about it at the government's TreasuryDirect website, which is surprisingly straightforward and even offers you the opportunity to "make a contribution to reduce the debt." Initially I thought that was funny, as it seems like such a mismatch to ask a single person to toss in a few bucks towards a multitrillion dollar debt. But then I realized it's not such a bad idea. After all, we have to start somewhere.

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General Motors will once again have its own in-house financing unit beginning Friday, when the auto giant closes on its $3.5 billion purchase of AmeriCredit (ACF). The new unit, to be renamed General Motors Financial, will allow the automaker to offer consumers more financing and leasing options, GM said in a written statement.

"This acquisition allows GM to offer an enhanced range of solutions for our customers and dealers, and establishes an important strategic capability for GM," said Chief Financial Officer Chris Liddell.

AmeriCredit shareholders voted to approve the purchase at a meeting Wednesday at the company's headquarters in Fort Worth, Texas.

Having an in-house financing arm gives GM greater control over the loan and lease deals it can offer consumers, including nonprime loans, in which AmeriCredit specializes. That greater flexibility, combined with desirable products, could help the automaker regain some of its declining share of the domestic auto market -- and aid in attracting investor interest to its planned initial public offering in November.

"When you own somebody, you can tell them what to do," Former GM CEO Edward Whitacre told The Detroit News last month. Whitacre said further that the deal would boost the automaker's public offering. "It strengthens the IPO because it shows we have a credit organization just like Ford Motor (F) and Toyota Motor (TM)."

GM Will Keep Working With GMAC/Ally

GM once owned GMAC, but sold its stake in the finance arm for $7.4 billion three years ago to raise cash. GMAC, now known as Ally Financial, still supplies loans to GM, as well as to Chrysler Group.

GM's purchase of AmeriCredit was a swift one. The all-cash transaction, which values each share of AmeriCredit at $24.50, was just announced in July. The companies have been working together since September 2009, when they began a program to offer nonprime loans, allowing GM to significantly boost sales to customers with less-than-stellar credit.

In its statement Wednesday, GM said "key partners," including Ally Financial, will continue to provide financial products, such as dealer financing and financing for prime customers.

In the second quarter, Ally financed 36% of GM's new retail sales in the U.S. and Canada, up from 28% last year, the Detroit Free Press reported. Ally also financed 86% of dealers' new-vehicle inventory at the end of June, in line with the 85% it financed a year earlier.

GM sought earlier this year to reacquire Ally, but the lender declined GM's overtures, leading to the automaker's decision to purchase AmeriCredit.

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Grandma and Gramps are not doing well. In fact, the state of finances for the elderly is a shambles.

Let's start with falling home prices. The AARP found that between 2007 and 2011, "3.5 million loans held by people age 50 or older were underwater, 600,000 were in foreclosure, and another 625,000 were 90 or more days delinquent." And that doesn't include the 1.5 million seniors who lost their homes during that period.
Surprisingly, another source of distress for seniors is student loans. A shocking 2.2 million Americans age 60 or older have student loan debt, with an average balance of $19,521, according to data from the Federal Reserve Bank of New York.

When the going got tough, Grandma and Grandpa did what those of any age do -- turned to credit cards. But in their case, credit card debt has been a major factor in driving them to declare bankruptcy. Between 1991 and 2007, the number of people ages 65 to 74 seeking bankruptcy rose 178 percent. Even worse, among those 75 and older, the number seeking bankruptcy was up 567 percent!

In a paper analyzing the data from a Consumer Bankruptcy Project, law professor John Pottow writes that "the median elder debtor in bankruptcy carries fifty percent more credit card debt than the median younger filer."

And to top it all off, these folks have little to no savings: Two-thirds of those age 75 or older have absolutely nothing money left in their retirement accounts, and have little hope of finding a decent job to help them make ends meet.

So What Happens When Grandma's Gone?

While those elderly individuals who do file for bankruptcy won't leave behind massive debts, those who remain committed to paying down their bills -- but die before they successfully do so -- can place a burden on their heirs.

Luckily, most kinds of debt cannot legally be transferred to a deceased person's heirs. But that doesn't mean you're entirely immune to Grandma's bills.

Let's take a look at what happens to the major kinds of debt when an elderly relative passes on.

1. Mortgage. A mortgage is a secured loan: Simply put, there is collateral (the property) that guarantees the balance. As such, mortgages are not forgiven when a borrower passes away. They passes on to the deceased's estate. If the estate has enough cash to cover the remaining mortgage balance, it can be used to pay off the loan and the heirs can take ownership of the house. Or, you can assume the mortgage, i.e., put it in your name or leave it in the original owner's name, but continue to pay it normally. Or you can refinance. And of course, there's always the option of selling the house to repay the remaining balance of the loan.

But if the mortgage is upside down, you're not stuck; there are ways to walk away from a bad mortgage left to you by a relative.

2. Car loan. Car loans, too, are a form of secured debt. As such, an heir can, with consent of the lender, assume a car loan, or refinance it. Otherwise, you'll either need to use the estate's cash to pay off the car loan so the heirs can take ownership of the vehicle, or the car will need to be sold to repay the remainder of the debt.

3. Personal loan. Although theses debts are usually unsecured -- i.e., there was no collateral put up against the loan -- they do still pass on to the estate. The executor's primary responsibility is to use the estate's assets to satisfy the deceased's remaining debts. If the assets cannot completely cover all the remaining debts, the executor usually divides up the money, and pays each debtor an equal percentage of what they are owed.

4. Student loan. Federally insured student loans are forgiven upon death. No repayment by heirs is necessary -- simply contact the lender or loan servicer and send them a copy of the death certificate (and possibly wait quite a bit for the paperwork to be complete, with involving the government and all). Unfortunately, private student loan debt is not forgiven and falls to the estate similar to those other loans mentioned above.

5. Credit card. Like personal loans, if there are enough assets remaining in the estate to cover the debt, it must be applied to outstanding credit card debt. If there is no remaining money, the credit card company usually writes off the debt.

Of Course, It's Not Always That Simple

If any of the debt was incurred with a cosigner, the burden of debt typically falls entirely onto the other party who signed the loan.

What's more, different states treat debt differently. Certain states are community property states; in these, any assets accumulated during the duration of a marriage are considered joint assets and, in some cases, so are debts -- regardless of whether both parties signed the loan. Meaning if your estranged -- but not officially divorced -- spouse has an outstanding loan from the time you were married, it could still fall back onto you, regardless of your current relationship with them.

Also, not all of a deceased person's assets become part of the estate. IRAs, 401(k)s, brokerage accounts -- even life insurance payouts -- all pass through, untouched, to the designated beneficiaries. These amounts, therefore, are not taken into consideration when determining whether or not an estate has enough funds to satisfy their debts.

So What Can and Should You Do?

First, if you are the child or grandchild of someone whose finances seem to be in trouble, it's important that you discuss it with them. It's not always easy, but being open, honest, and working together to craft a plan now can save you countless hours of stress later -- and provide your loved one with the assurance that when they pass on, they aren't leaving you with an unpleasant burden.

Second, remind co-signers about any loans they are still listed on. It's also important to go through and update beneficiaries on those accounts that do directly pass through without becoming part of the estate.

Lastly, if you're over the age of 50, think twice about incurring new debt. It should be a last resort, an emergency-only option -- both for your own peace of mind as well as that of your loved ones.

Making the right financial decisions today makes a world of difference in your golden years - to both you and your loved ones. But most people aren't prepared. Don't make the same mistakes as the masses. Learn about The Shocking Can't-Miss Truth About Your Retirement in this special free report from The Motley Fool.

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