As much as everyone wishes to purchase the latest trends and newest tech, not everyone has the money saved up to do so. As such, the only way for most people to engage with the economy is through taking on debt, spending money that they do not have to repay at a later date.
This is one of the many reasons that the average American carries over six thousand dollars in credit card debt. However, even this can only account for some of the burdens of consumer debt. What contributes to this common burden? Here’s what you need to know.
What Is Consumer Debt?
Consumer debt is the combination of a household’s personal debts. These debts are not used towards investments, businesses, or government operations, but for a person or family’s desires. The higher the rate of household consumption, the higher the burden of consumer debt.
What Are the Types of Personal Debt?
What types of personal debt can comprise consumer debt? There are many different kinds of debt that a household may carry, with the most common types including:
- Revolving debts such as credit cards
- Installment loans like furniture or car payments
- Student loans
- Payday loans, which claim to help but actually add to your debt
These types of personal debt can pile up in a hurry, especially if you’re not paying attention. Most consumers don’t think twice about incurring an installment loan to get a brand new phone or a new couch. Even if they already struggle to keep up payments on their student loans, car, and home.
How Can Consumers Reduce Their Debt?
So, if their debt burden is becoming unbearable, how can consumers reduce it? There are a few ways that consumers can retake control of their finances after accruing thousands of dollars in debts, including but not limited to:
- Cutting down on external purchases to save up and pay down personal debt
- Consulting with a credit repair company
- Consolidating their debts with a consolidation loan
Each of these methods can help consumers reduce their personal debt. However, if the burden of debt becomes unbearable and cannot be resolved by these methods, what then is the best option?
When Is Bankruptcy the Best Option?
If the level of debt you bear is beyond your ability to repay, then bankruptcy might be your best or only option to get the collectors to stop harassing you day in and day out. If you feel that it’s worth taking a seven or ten-year hit to your credit score to end the constant phone calls and letters, then reach out to a bankruptcy lawyer to see what they can do to ease your woes.
Do You Need More Tips to Reduce or Manage Your Debt?
The burden of consumer debt grows more crushing for Americans each and every year. If you need more tips to help you reduce or manage your personal debt, then why not check out our blog? We update each day with more helpful and informative financial articles like this one.