A Breakdown Of Personal Debt
Most of us owe something; credit cards, mortgages
, loans from friends or families. It's not a secret that this personal debt is holding us back from obtaining financial freedom, but where exactly does this debt come from? A recent study shows a breakdown of what type of debt people owe and how much it totals.
According to the Community Financial Services Association, we have a staggering $40 billion in outstanding payday advances. Even though payday lending is very controversial, it is a widely used survival tool for many cash-strapped consumers. Payday loans are small, unsecured short-term advances that are usually between $100 and $500. Normally these types of loans are due to be paid back in full within 14 days. Due to their short term of nature, these loans can cause major financial trouble for people who are unable to pay them back in full within the maturity time.
According to the Federal Reserve, American consumers have borrowed $313.8 billion in auto loans as of February 2009. The average financed amount was $26,268. Taxes came in as an enormous debt for many people. According to the IRS, there is currently $345 billion in unpaid individual personal income tax debt.
According to the US Department of Education, federal student loans, which account for 77% of all education loans, totalled a debt of $556 billion, up 70% from ten years earlier. In 2007 and 2008, the amount of non-federal student loans disbursed by private institutions totalled $17.6 billion, up 592% from the 1997 - 1998 years total of $2.54 billion.
Revolving consumer credit totalled $953 billion, the largest component of this type of debt comes from credit cards, which is estimated to comprise of 98% of revolving consumer credit debt. Not surprising, residential mortgage debt made up the largest amount of consumer debt with an outstanding $14.64 trillion as of the end of 2008, up $4 trillion from 2004. This has been a major contributing factor to the US credit crisis as falling home values have added pressure to borrowers. Small business loans make up an additional $68 billion in outstanding debt as well as $114 billion in farm loans and $577.8 billon in home equity loans.
Regardless of where your debt comes from, it is always a good idea to keep it under control. Paying off more frivolous debt such as high-interest credit cards should be a priority. If you find yourself with bad credit but are in need of a loan, there are options available to you. Before borrowing, do some research and find a lender with flexible terms that will suit your budget and not exacerbate your debt situation.
by: Molly Wider
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