What Is Consumer Debt?Duhaime’s Legal Dictionary defines consumer debt as “debt incurred by an individual primarily for a personal, family, or household purpose.” This type of debt does not include businesses debts or those that are geared toward long-term payoff such as education and real estate.
Credit cards are the most common form of consumer debt. The majority of people have at least one credit card. According to findings from the April 2014 Gallup survey, most card-carrying Americans have approximately 3.7 at their disposal.
Another form of consumer debt that is on the rise is the payday loan. Thanks to today’s economy, many consumers are struggling to make a living paycheck to paycheck. In their desperation for a quick fix, some people take out high-interest payday loans only to find themselves trapped in a vicious cycle.
According to the Center for Responsible Lending, “Twelve million Americans are trapped every year in a cycle of 400% interest payday loans. A 36% cap on annual interest springs the trap.”
Statistics provided by the folks at Responsible Lending show that:
Consumer debt is a practice that mainly pervades the western culture, more particularly within the United Kingdom and the United States. Many major industries have practiced “buying on credit” during recent decades as a way to increase demand for a product.
The biggest example of this is the automobile industry since automobiles are the status symbol of many individuals and cultures. Toward the end of the 20th century, the average household was about $8000 in the hole in consumer debt.
Towards the end of the first decade of the 21st-century, consumer debt hit its peak and began to level off with the market crash of 2008 and the ensuing recession. The economy has since rebounded but is very sluggish. Perhaps because consumers are wiser with their money. This is making it harder for companies to sell their goods and services. Eventually, it could lead to a fall in prices as demand for expensive products begins to fall.
Ancient wisdom believed that taking on consumer debt just to purchase goods and services was taboo. Rather than drawing upon that wisdom, the accumulation of consumer debt has been a cultural phenomenon in western civilization. It is also the reason that Americans tend to find themselves now scrambling to live from paycheck to paycheck. However, with sound financial guidance, more people can become wiser about their hard-earned money and how to make it work for them.
If we learn to live within our means and stay out of debt, we will have a better quality of life. No longer will be trapped in our jobs and a slave to lending institutions. Our work will also be more fulfilling. Then we can use our wealth to pursue our passions and interests in life.
If you have fallen on hard times due to consumer debt, then you have come to the right place. This is not a fight you have to face alone. The Debt Ninja is here to fight for you.
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