Why Are Most Americans in Debt?

There have been many studies attempting to determine just what proportion of American adults are in debt, but defining debt is a little bit tricky. Some studies excluded things like mortgages, even though it is technically a debt, and focused more on things like credit card debt where higher interest rates were involved. If you take into account all types of debt, then it is clear to see that the majority of Americans are currently in debt. However, before you panic and start calling Grainger Legal Services to file bankruptcy, you should first understand why so many people are in debt, and why that isn’t always a bad thing.

Mortgages

The biggest debt most people have is in the form of a mortgage. About 70 percent of all home purchases are completed with the help of financing. The buyer makes a downpayment, which is only a fraction of the home’s value, and the remaining balance is paid off over the next decade or two. This leaves many people with hundreds of thousands of dollars in debt immediately after purchasing a home.

Student Loans

Another big contributor to the high percentage of Americans who are in debt is the student loan. College tuition rates are climbing at a rate faster than inflation, and with more people getting degrees now, the salaries being offered to college graduates are not as big as you would expect. Unless a student is fortunate enough to get a scholarship, it is likely impossible to pay for tuition by any means other than taking out loans. Even students on scholarship have to pay hundreds or even thousands for textbooks and other expensive school supplies.

Credit Cards

Credit cards are another reason many people are in debt. Credit cards not only let you purchase something whether you actually have the money now or not, but they are also very convenient and come with a few major benefits. You usually get fraud protection as well as some sort of reward system. With how easy it is to use a credit card, some people can fall thousands of dollars in debt without even thinking about it.

Is All Debt Bad?

Not all debt is bad. Mortgages are usually accompanied by low interest rates, and student loans offered by the government are subsidized, and you’ll never have to make payments larger than you can afford. It’s when spending with a high interest credit card gets out of control, whether out of necessity or recklessness, that debt becomes bad. It is then that you should start looking into Grainger Legal Services for bankruptcy options.