Is it just us, or does it seem that America, in general, is addicted to debt? Just call us the credit nation, from the highest levels of government all the way down to Main Street USA. America and Americans are obsessed with credit and rely on debt every day. Even as the nation and its consumers struggle under record debt levels, we continue to rack up more.
Like it or not, we do need credit. As we have established during and since the global financial meltdown of 2008, credit keeps the wheels of the global money machine well greased. Concepts, such as buying a home, starting a business, or buying an investment property often could not become realities without some form of credit. In fact, utility companies, banks, landlords and even employers often require credit checks before extending services or employment. Consider the following statistics:
- As reported by the Federal Reserve Board (FRB), the size of total U.S. consumer debt grew nearly five times in size from $824 billion in 1990 to nearly $2.2 trillion in 2005.
- According to Experian, without factoring in mortgages, in 2008 the average American held over $16,635 in debt.
- According to ComScore, in 2008 55% of Americans maintained a running balance on their credit card accounts.
- According to Visa and MasterCard, in 2006 alone there were 984 million bank-issued Visa and MasterCard credit and debit card accounts in the United States.
- Mail Monitor, a credit card direct mail tracking service, reports that roughly 4.2 billion credit card offers were made to U.S. households in 2008.
- An online poll conducted by CardTrak.com reports that the average rate for bank credit cards reached a whopping 19% in March 2007, whereas the average rate in 2003 was 16.5%.
Credit and its associated debts are a part of our reality, and will continue to be for the foreseeable future, and it is up to each individual consumer to not let credit ruin them. Unfortunately for many, it already has. The level of consumer debt has grown exponentially in the U.S., where tens of millions of credit consumers find themselves overwhelmed by their personal debts.
What about you? Are you managing your debt, or is it ruining your life? Without disclosing anything personal, or your identity, we’d love to hear your comments about how you are managing debt these days, or how it’s managing you. Where do you see our country going with it’s current debt seemingly out of control, and no apparent leaders in Washington who seem to be able to figure out how to bring it under control?
Use the comment link below to sound off and tell us what you think. Remember, your email address will NEVER appear on this site, so feel free to tell us what you think.
You’ve got a little extra money and want to destroy some debt. But which should you pay off first – the smallest debt, or the one with the highest interest rate?
Questions or comments? We’d love to hear from you. Just click the “comment” link below to sound off.
The housing slump has sent home values plummeting, and it has left an ever-growing number of homeowners upside down in their mortgage loans: They now owe more on their mortgage than what their homes are worth. This unfortunate economic reality has led a growing number of consumers to debt consolidation loans to help reduce the amount of credit debt they are carrying.
The National Association of Realtors reported recently that the median home sales price across the nation in December stood at $168,800. That’s down 1 percent from a year earlier, and significantly from the highs in home values the country saw in 2005 and early 2006.
In better times for the housing market, homeowners would have simply taken out low-interest-rate home equity loans to pay down their high-interest-rate credit card debt. That strategy to eliminate debt, though, is becoming rarer today. Far too many homeowners don’t have any equity in their homes, making home equity loans an impossibility. These homeowners, then, have few other choices but to turn to debt consolidators to help them gain a handle on their rising credit card debt.
Consumers who turn to this method will take out a loan with a debt consolidation company. Debt consolidators will then use the loan payments to pay down consumers’ outstanding debt. Often, debt consolidation firms will negotiate with creditors to reduce the amount of debt their clients owe. The negatives with debt consolidation loans, though, are significant: These loans often come with high interest rates and fees. Consumers often end up paying more in total by taking out a debt consolidation loan than they would have had they simply paid off their debt on their own. Debt consolidation loans also harm consumers’ three-digit credit scores – a big problem in today’s financial world.
However, with housing values continuing to take a beating, many consumers have no other choice for bad debt consolidation. Consumers in such a situation should be careful, though, to do their research before taking out a debt consolidation loan. They should ask their debt consolidators exactly how much they’ll have to pay in fees and how high their interest rate will be. They should also ask exactly how long it will take them to pay off their existing debt. By asking the right questions, consumers dramatically improve their odds of taking out a debt consolidation loan that will provide them with real financial relief.
Debt consolidation is getting more popular as more people are struggling with finances. If you want to get onboard, but you have bad credit, there may be some help available. Finance companies are under pressure to find new ways to get customers. Early in 2011, at least two of them, Wells Fargo and Citibank, announced they would offer bad-credit debt consolidation loans. This is good news for people with less than perfect credit.
Many people with bad credit are already struggling to make their monthly loan payments. The opportunity to consolidate their loans provides a way they can still pay them, but at a lower monthly payment. This can help them avoid further credit blemishes, and even start building a good credit history. Additionally, those with blemishes who are on the road to recovery, and who have made timely payments for a while, will have the ability to consolidate high interest loans into one with more affordable rates.
This is not to say that debt consolidation loans for people with poor credit will have low interest rates. If a person’s credit is on the mend, however, he may qualify for a lower rate than he’s currently paying. These loans go for varying amounts.
Whether you have bad or good credit, debt consolidation is usually a good option. You do not have to be a mathematician to figure out lower interest rates and lower monthly payments are beneficial. However, you should always use caution. You do not want to fall into the trap of consolidating your credit cards only to run them back up to their limits. That is a recipe for financial disaster. Look at a debt consolidation loan as an opportunity for a fresh start, and try to break bad spending habits
Did you resolve to get in better shape financially this year? One way to do it is to shed some of that unsightly debt.
Have any other “Reduct the Debt” tips for our readers? We’d love to hear your ideas. Just click the “comment” link below and tell us your plans…