One of the most prevalent problems in the United States is debt. Federal and state governments are known for piling up debt, but American citizens also have their fair share of debt problems. American citizens rack up personal debt in many different categories and it can end up crippling many of them financially.
Revolving Debt
One of the most prevalent types of personal consumer debt is revolving debt. This is basically comprised of credit card debt in most cases. According to the Federal Reserve Board of Governors, Americans have more than $953 billion in revolving debt as of the end of 2010. Most households have several credit cards with balances on them and many of them struggle to make just the minimum payments on a debt with such high interest rates.
Payday Loans
Payday loans or cash advances are another area in which many Americans accumulate debt. This is a type of short-term lending that usually involves small loans of less than $500. With this type of loan, you typically have to pay a high interest rate and you borrow against your next paycheck or some other type of collateral. Many people use these types of loans as a way to get through until their next payday when they need money. This type of debt accounts for more than $40 billion per year in the United States.
Auto Loans
Another type of debt that many Americans have is an auto loan. With an auto loan, you borrow a certain amount of money to pay for a car and then you make payments for several years to pay it off. This is considered to be an installment loan. This section of personal debt in the United States accounts for about $314 billion, according to the Federal Reserve. Consumers who pay off their loans and then drive their cars longer instead of immediately trading it in for a new car could reduce this number.
Other Personal Debts
Besides these three kinds of consumer debt, the average American also has several other types of personal debt. For example, $345 billion is owed to the IRS from people who do not pay their taxes. Many people also borrow money from the federal government through student loans and it results in another $556 billion in personal debt. This is a long-term type of debt that can take between 10 and 30 years to pay off. Many consumers also take out home-equity lines of credit, with totals of $578 billion in this area.
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