How Much Consumer Debt Can I Manage?

Consumer debt takes on various forms, like car financing and other loans, home mortgages and credit cards. The U. S. Census Bureau estimates that Americans carried more than $929 billion in credit card debt in 2010, while the Federal Reserve advises that overall debt in that same year was $2.4 trillion. Several signs indicate whether you can manage your personal debt.

Credit Score

You may have too much debt if your credit card balances are high enough to lower your credit score. Manage your charges so your debt load does not go above 10 percent of your total credit limits to maintain a good credit rating. Your credit score suffers if you spend more than 30 percent of your available credit lines, MSN Money writer Liz Pulliam Weston warns. The harm to your credit increases proportionally as you use more of your spending power.

Warning Signs

You are above a comfortable level of consumer debt if you struggle to make at least the minimum monthly payments on your credit cards and if you skip some bills each month to be able to afford the others. Another trouble sign is having to charge groceries, gas and other normal living expenses on your credit cards or depending on cash advances, GoBankingRates.com warns.

Considerations

Your ability to manage a certain debt level can change at any time due to life circumstances. For example, you might be able to handle your debt loan comfortably on your current income, but you would have problems if you lost your job. Unexpected home repairs, medical or dental expenses or other unavoidable bills could cause you to run up your credit cards. Leave some leeway in your debt load to allow for unexpected problems that impact you financially.

Handling Debt

You have a variety of options if your consumer debt load gets too high. You may be able to create your own budget, or you can consult a nonprofit consumer credit counselor if your personal efforts fail, the FTC advises. The counselor can give you strategies to handle the debt or get you into a structured payback plan. Bankruptcy is an option if you cannot find another way out, but the FTC warns that it stays on your credit bureau records for a full decade. Chapter 7 bankruptcy makes you give up most of your assets but releases you from almost all of your debt, while Chapter 13 allows you to keep some things and puts you into a partial payment plan.