The world has been in the grips of the COVID-19 pandemic for over a year now, but the recovery is on its way. With mass immunization quickly becoming a reality, the world is emerging not just from a public health crisis but an economic one as well.
Millions of people have had their livelihoods interrupted, and even as they get back to work, many will still have debt hanging around their necks. Borrowing helped many survive the pandemic economy, but that debt will hold them back from their future financial goals, potentially for years.
Growing numbers of people are struggling with debt and don’t know what to do about it.
What Household Debt Looks Like Today
The way people borrow is changing. The average consumer debt today is over $92,000 per person. And that number doesn’t even factor in mortgage loans. Here’s where that money goes:
Credit Cards
When credit cards become your lifeline, you’re heading toward the financial danger zone. It can feel extremely convenient having a card you can use when your paycheck winds up short, but the consumer always pays for it later in high interest rates.
The average credit card balance is over $5,300, and it’s a problem shared across the economic spectrum. While credit card debt represents a bigger portion of the net worth of families in lower percentiles, higher-income households also carry substantial balances every month.
If credit card debt is holding you back, debt consolidation services may be able to help you slash interest rates and pay it back sooner. Look for help from a certified Credit Counsellor from a non-profit credit counseling agency.
Personal Loans
Lines of credit, emergency expense loans, debt consolidation, and other types of personal borrowing account for $16,458 of personal debt, but only about a quarter of people have this type of debt.
Student Loans
The average student loan debt is $38,792, and it, along with mortgage debt, is growing. Student loan debt increased by 9 percent in 2020. The costs of tuition and living expenses only continue to climb, leaving graduates with considerable debt burdens later.
Growth in this type of debt has broader implications for the rest of the economy. The persistence of student debt is holding back many younger adults from buying homes, starting families, and saving for their retirement.
Auto Loans
Auto loans are the second-most-popular type of credit. Most consumers can’t afford to buy their vehicles outright and rely on auto loans from a variety of sources to get a new set of wheels. Over two-thirds of adults have at least one loan related to their vehicle.
Managing Debt
Debt is a problem for people across the socio-economic spectrum. Often, bigger paychecks just mean higher credit card limits, and it’s not easy to pay it back when you’ve maxed them out.
Managing debt takes a multi-faceted approach. You need a plan for paying it back on a timeline that will help you achieve your financial goals. Not only will you need a budget and a plan to trim expenses, but you can also take advantage of debt consolidation options that will slash your interest rates and make it more affordable to pay back the credit card companies. Using every tool that you have available, you can get out of debt sooner than later.
