U.S. consumer credit fell $3.54 bln in October

WASHINGTON (Reuters) - U.S. consumer borrowing unexpectedly fell by $3.54 billion in October, marking just the second monthly decline in more than a decade, a Federal Reserve report showed on Friday.

October consumer credit fell at an annual rate of 1.5 percent to a total of $2.578 trillion. In September, it rose by a revised $6.73 billion, which was originally reported as an increase of $6.86 billion.

Analysts polled by Reuters were expecting an increase of $2 billion in consumer borrowing for October.

It was the largest decline since August 2008, when consumer credit fell by $6.43 billion, and only the second negative reading since January 1998.

Lenders have been clamping down on credit as the financial crisis rages, dragging down consumer spending and exacerbating a recession that began a year ago.

Auto sales have been a particularly weak spot, and auto executives who are in Washington to lobby for government aid have complained about customers having trouble getting loans.

Non-revolving credit, which includes closed-end loans for big-ticket items like cars, boats, college educations and holidays, dropped $3.35 billion, or at a 2.5 percent rate, to $1.602 trillion.

The figures showed that interest rates on new car loans at auto finance companies shot up to 6.41 percent in October from 6.24 percent in September, despite Federal Reserve interest- rate cuts on October 8 and October 29 that took the benchmark federal funds rate down to 1 percent.

In August, the interest rate on new car loans was 5.11 percent, the report shows.

The amount of new car loans financed edged down to $25.39 billion in October from $25.43 billion in September and $26.92 billion in August.

Revolving credit, made up of credit and charge cards, dipped $181 million, or a 0.2 percent rate, to $976.1 billion in October.

(Reporting by Emily Kaiser, Editing by Jan Paschal)