This paper studies the effect of financial conditions, through credit supply, on household consumption. Using data from the PSID, I document substantial household level liquid debt volatility, particularly for households with low liquid wealth. Large time variation in loan rejection rates in the SCE suggest a key role for credit supply in these debt dynamics. I then show that lending standards, consumer credit and consumption correlate with risk prices. Motivated by these empirical observations, I develop a model where lending between households is intermediated by agents with time-varying risk bearing capacity. Shocks to intermediaries’ risk appetite generate large aggregate consumption responses, driven by borrower deleveraging, rationalising the empirical correlation between aggregate consumption and risk prices.