{"id":6949,"date":"2024-10-30T08:14:04","date_gmt":"2024-10-30T08:14:04","guid":{"rendered":"https:\/\/finderica.com\/different-types-of-consumer-debt\/"},"modified":"2024-10-30T08:14:04","modified_gmt":"2024-10-30T08:14:04","slug":"different-types-of-consumer-debt","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=6949","title":{"rendered":"Different Types of Consumer Debt"},"content":{"rendered":"\n<div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"lazyload clicker_number\" style=\"position: absolute; height: 1px; width: 100%\" alt=\"ScoreCard Research\" data-count=\"216.98.0.236,216.98.0.236, 172.68.174.60\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\"><\/p>\n<p><span style=\"font-weight: 400;\">Debt weighs heavily on the <\/span><span style=\"font-weight: 400;\">minds and wallets<\/span><span style=\"font-weight: 400;\"> of people across the country. The average American has racked up <\/span><a href=\"https:\/\/www.businessinsider.com\/personal-finance\/credit-score\/average-american-debt\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">$104,215 of debt<\/span><\/a><span style=\"font-weight: 400;\"> across mortgages, auto loans, student loans and credit cards.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Mortgages make up the majority of this debt. HELOCs and auto loans take the second and third spots. While credit card debt ranks in fourth place, it still majorly impacts consumers. The typical American has swiped their way to $6,501 in credit card debt on average.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">How did all these people get here \u2014 and how do they get out?<\/span><\/p>\n<div class=\"adBorder\" id=\"thepe-70824695\">\n<h3>Heard of These Credit Card Debt Tips?<\/h3>\n<p>If you\u2019re a good credit card user, you already know how payment history, credit utilization and the length of your credit history affect your credit score.<\/p>\n<p>But millions of Americans overlook\u00a0<a href=\"https:\/\/partners.thepennyhoarder.com\/smarten-up-americans-prt\/?aff_id=384&amp;aff_sub3=smarten-up-americans-prt\/&amp;aff_sub4=191916\" rel=\"false noopener\" target=\"_blank\">these easy tips<\/a> that could help them manage credit card debt even more wisely.<\/p>\n<p><a href=\"https:\/\/partners.thepennyhoarder.com\/smarten-up-americans-prt\/?aff_id=384&amp;aff_sub3=smarten-up-americans-prt\/&amp;aff_sub4=191916\" rel=\"false noopener\" target=\"_blank\">Read more<\/a> to boost your credit knowledge and keep your credit score in check.<\/p>\n<\/div>\n<h2><span style=\"font-weight: 400;\">Defining Consumer Debt<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Consumer debt is broken down into two main categories: revolving and installment debt. Let\u2019s take a closer look at these categories, their definitions and examples of each.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">1. Revolving Debt<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The revolving side of consumer debt involves someone having a credit agreement with a lender that sets a credit limit. Many people see this as how much you can spend. However, it\u2019s more like how much you can borrow within a certain period of time. So, if the credit limit on your shiny new credit card is $5,800 a month, that\u2019s how much you can borrow. Then you pay it back.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some examples of revolving credit include:<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Credit cards: <span style=\"font-weight: 400;\">A credit card is what most people think of with consumer debt. With a credit card, a borrower can make purchases up to the set credit limit. Interest is applied to the unpaid balance.\u00a0<\/span><\/b><\/li>\n<li aria-level=\"1\"><strong>Store cards<\/strong>:<span style=\"font-weight: 400;\"> A specific retailer issues this card. A cashier at your favorite department store may have offered you one of these before, dangling discounts galore along with it. As with traditional credit cards, you\u2019re on the hook to pay back what you charge on it. Then interest is applied to the unpaid balance.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><strong>Lines of credit<\/strong>: <span style=\"font-weight: 400;\">A bank or other financial institution can issue a line of credit with a predetermined limit. This setup allows borrowers to take funds as they need them up to said limit. Then, once again, interest applies. Some lines are unsecured, and others are secured through collateral.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These are all harmless \u2014 and even good to have \u2014 as long as you realize you can accrue debt quickly. This is especially true if your lender has higher interest rates. While a good credit score can help with this, the <\/span><a href=\"https:\/\/www.forbes.com\/advisor\/credit-cards\/average-credit-card-interest-rate\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">current average credit card interest rate<\/span><\/a><span style=\"font-weight: 400;\"> is a whopping 27.62%.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Making the minimum payment sounds great, until the interest kicks in. The more often you do this, the quicker you\u2019ll fall into debt, meaning it\u2019s not a best practice for reducing debt. But if it\u2019s all you can do, it\u2019s still better than paying nothing.\u00a0\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">2. Installment Debt<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">For installment debt, an entity lends you a lump sum of money, which you repay over a set period of time. The installment includes part of the principal, or the original amount of money you borrowed, plus interest.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The following are common types of installment debt:<\/span><\/p>\n<ul>\n<li><b>Mortgages: <\/b><span style=\"font-weight: 400;\">People use these loans to finance a real estate purchase. There are fixed interest rates for the life of the loan or adjustable rates based on market conditions. Terms are typically 15 or 30 years. Installments include the principal and interest.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><b>Auto loans: <span style=\"font-weight: 400;\">People in need of a new set of wheels take out auto loans to pay for it. The length of the loan varies from two to seven years on average, and the installments include the principal and interest. People often call this the car note.<\/span><\/b><\/li>\n<li aria-level=\"1\"><strong>Student loans<\/strong>: <span style=\"font-weight: 400;\">Student loans<\/span><span style=\"font-weight: 400;\"> finance higher education expenses. You can get these from private lenders as well as the federal government.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><strong>Personal loans<\/strong>: <span style=\"font-weight: 400;\">These are similar to an auto loan or a mortgage. People take them out for many reasons, like to pay for weddings or home renovations. However, it\u2019s an unsecured loan because there is no collateral to back it. So whether or not you get one can depend on your credit history, and it may have high interest rates.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><strong>Home equity loans<\/strong>: <span style=\"font-weight: 400;\">A home equity loan allows someone to borrow money against the equity they\u2019ve built in their home. Equity refers to the property\u2019s current market value and the outstanding mortgage balance. You can use it to finance a variety of things, including home renovations or and unexpected expenses. A home equity loan usually has fixed interest rates and repayment terms.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">One of the most important things to understand is whether your installment debt has fixed or variable rates. This significantly impacts your payments. Fixed rates often are higher, but they don\u2019t change. Variable rates are at the mercy of market conditions. So, you could start with a lower rate, then one day get hit with a much higher one.<\/span><\/p>\n<div class=\"adBorder\" id=\"thepe-1672821962\">\n<h3>Can You Survive 10 Days of Budgeting?<\/h3>\n<p>If you need to wrangle your budget, it may be time to consider a savings challenge. Our\u00a0<a href=\"https:\/\/partners.thepennyhoarder.com\/organize-your-finances-prt\/?aff_id=384&amp;aff_sub3=organize-your-finances-prt\/&amp;aff_sub4=191763\" rel=\"false noopener\" target=\"_blank\">10-Day Savings Challenge<\/a>\u00a0will teach you how to make your money work for you with a high-yield savings account, stop overpaying on Amazon, earn money for trying out apps or watching movie previews and more.<\/p>\n<p><a href=\"https:\/\/partners.thepennyhoarder.com\/organize-your-finances-prt\/?aff_id=384&amp;aff_sub3=organize-your-finances-prt\/&amp;aff_sub4=191763\" target=\"_blank\" rel=\"noopener\">Start saving now<\/a>!<\/p>\n<\/div>\n<h3><span style=\"font-weight: 400;\">A Word on Medical Debt<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Wondering where <\/span><span style=\"font-weight: 400;\">medical debt<\/span><span style=\"font-weight: 400;\"> falls among what is considered consumer debt? The answer is: It depends. If your medical debt has an assigned payment, then it\u2019s installment debt. Otherwise, it doesn\u2019t fall into either category. If you don\u2019t pay the provider within a certain period of time and the debt goes to collections, that also means it ends up on your credit report and can affect your credit score. There are federal efforts in the works to change that, but in the meantime, you can check with your hospital or doctor\u2019s office to see if they have the flexibility to offer a payment plan.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Consumer Debt Considerations<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The <\/span><a href=\"https:\/\/www.newyorkfed.org\/microeconomics\/hhdc\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">total household debt<\/span><\/a><span style=\"font-weight: 400;\"> in the United States is at $17.69 trillion, according to the Federal Reserve Bank of New York. Yes, that\u2019s a trillion with a \u201cT.\u201d\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Why do so many Americans go into debt? Everyone\u2019s situation is different, but some common factors are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Credit is easy to access.<\/b><span style=\"font-weight: 400;\"> Just about every retailer offers a store credit card, and offers for the latest credit card promotion come through the mail every day. They often have minimal requirements that are easy to meet if you need cash.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Interest rates are high.<\/b><span style=\"font-weight: 400;\"> Interest adds up fast. Not paying your balance in full each month means interest applies, and it\u2019s easy for things to snowball.\u00a0\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>On that note, minimum payments often do very little to alleviate debt. <\/b><span style=\"font-weight: 400;\">Just paying what\u2019s required makes it harder to get out of debt in the long run.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>The economy plays a role, too. <\/b><span style=\"font-weight: 400;\">A struggling economy and job market often cause people to rely on credit cards and loans to cover expenses.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Spending habits.<\/b><span style=\"font-weight: 400;\"> If you\u2019re spending more than you make, you\u2019re going to go into debt.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">How To Reduce Consumer Debt<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">If you\u2019re dealing with consumer debt, there are some strategies you can take to reduce or eliminate it:<\/span><\/p>\n<ul>\n<li><b>Reduce expenses:<\/b><span style=\"font-weight: 400;\"> Go through what you\u2019re paying for each month and cut what you don\u2019t need. You can save more than you think by canceling unnecessary subscriptions and services. Identify services you can reduce by negotiating a new plan or changing provider (e.g., cell phone, Wi-Fi, streaming channels, etc.)<\/span><\/li>\n<li aria-level=\"1\"><b>Budget: <span style=\"font-weight: 400;\">Track your spending and income down to the SS Reader. Prioritize paying off debt as much as possible, especially high-interest debt. Our list of the <\/span><span style=\"font-weight: 400;\">best budgeting apps<\/span><span style=\"font-weight: 400;\"> can get you started.<\/span><\/b><\/li>\n<li aria-level=\"1\"><strong>Consolidate<\/strong>: <span style=\"font-weight: 400;\">You can often <\/span><span style=\"font-weight: 400;\">consolidate debts<\/span><span style=\"font-weight: 400;\"> from multiple sources into one loan with a reduced interest rate or more generous terms.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><strong>Increase income:<\/strong> <span style=\"font-weight: 400;\">This one isn\u2019t always easy, but it\u2019s worth it to seek out a higher paying job, a raise, passive sources of income or <\/span><span style=\"font-weight: 400;\">starting a side hustle<\/span><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Credit counseling can help, too. Discover how a credit counselor can assist you in <\/span><span style=\"font-weight: 400;\">reducing your consumer debt<\/span><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<div class=\"adBorder\" id=\"thepe-1740812997\">\n<h3>Drowning in Expenses?<\/h3>\n<p>Maybe you\u2019re scrambling after your car broke down. Or you got a medical bill you weren\u2019t expecting. Or inflation has finally pushed your budget over the edge. Take a breath. You don\u2019t need to go it alone.<\/p>\n<p>When money is tight, <a href=\"https:\/\/partners.thepennyhoarder.com\/when-money-is-tight-sdyn-prt\/\/?aff_id=384&amp;aff_sub3=when-money-is-tight-sdyn-prt\/&amp;aff_sub4=191825\" target=\"_blank\" rel=\"noopener\">these resources<\/a> can help you manage unexpected expenses without stress.<\/p>\n<\/div>\n<p>        <!-- ACF Financial Disclaimer --><\/p>\n<p>        <!-- End ACF Financial Disclaimer --><\/p>\n<p>        <!-- \n\n<div class=\"single-social-share-bottom text-center\"> --><br \/>\n                    <!-- <\/div>\n\n --><\/p>\n<p>        <!-- Newsletter Signup Form --><\/p>\n<div class=\"newsletter-signup-wrapper-for-digioh\">\n<div class=\"col-xs-12 newsletter-wrap flex-row\">\n<div class=\"container flex-container\">\n<div class=\"col-xs-12 new-newsletter-form\">\n<p class=\"text-subheading\">Ready to stop worrying about money?<\/p>\n<p class=\"text-get-daily\">Get the SS Daily<\/p>\n<p class=\"email-privacy-policy-blurb-white\">\n<\/p><\/div>\n<\/div><\/div>\n<\/p><\/div>\n<p>        <!-- End Newsletter Signup Form --><\/p><\/div>\n<p><script type=\"text\/javascript\" id=\"wp-fcapi-js-before\">\n\/* <![CDATA[ *\/\n!function(f,b,e,v,n,t,s)\n{if(f.fbq)return;n=f.fbq=function(){n.callMethod?\nn.callMethod.apply(n,arguments):n.queue.push(arguments)};\nif(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';\nn.queue=[];t=b.createElement(e);t.async=!0;\nt.src=v;s=b.getElementsByTagName(e)[0];\ns.parentNode.insertBefore(t,s)}(window, document,'script',\n'https:\/\/connect.facebook.net\/en_US\/fbevents.js');\nfbq('init', '263664193816679');\n\/* ]]> *\/\n<\/script><br \/>\n<br \/><a href=\"https:\/\/www.thepennyhoarder.com\/debt\/consumer-debt\/\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Debt weighs heavily on the minds and wallets of people across the country. The average American has racked up $104,215 of debt across mortgages, auto loans, student loans and credit cards.\u00a0 Mortgages make up the majority of this debt. HELOCs and auto loans take the second and third spots. While credit card debt ranks in<\/p>\n","protected":false},"author":1,"featured_media":6950,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[221],"tags":[1729,367,107],"class_list":{"0":"post-6949","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-debt","8":"tag-consumer","9":"tag-debt","10":"tag-types"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/6949","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6949"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/6949\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/6950"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6949"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6949"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6949"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}