How Serious Is Your Debt? Read This and Take Our Quiz!
Most American adults have some form of debt, and we're digging ourselves in deeper every year. Per this 2018 CNBC article, the average adult carries around $38,000 in debt, not including their mortgage. That's an increase of about $1,000 over past years. Furthermore, fewer Americans can claim they have no debt at all, compared to the past.
But debt is dangerous! Beyond difficulty getting a loan, debt can lead to a host of problems beyond a financial crisis like:
- Other health issues
- Depression, even suicide
Family Credit is here to help! Read on to learn more about your debt and your options. Take our How Serious is My Debt Quiz to find out if you need to adjust your budget or seek our professional help.
With this article, we'll delve into some types of debt, talk about budgeting, and learn more about budgeting, debt management and debt consolidation.
Types of Debt
According to a study by Northwestern Mutual (NM), the most common debts are:
- Credit cards
- Student Loans
- Auto Loans
And while not cited by NM, we think it's important to mention healthcare and hospital debts too, as these are often unexpected, large debts that we don't plan for.
"Good Debt" vs. "Bad Debt"
In a nutshell, "Good Debt" has the potential to increase your overall worth. Mortgages might be the best example of a good debt. As you pay down your home loan, maintain and improve your property, there is a good chance you'll end up with some equity. In other words, you will owe less on your loan than your home is worth. Which means you could:
- Sell your home for a profit
- Refinance your home at a lower interest rate to have a much lower payment.
- Bad Debt* is money you owe, which will never improve your worth in any way:
- Credit card debt
- "Bill Me Later" debts
- New car loans
- Debt on jewelry (like engagement rings)
I Have a Lot of Debt. What Can I do?
Many Americans carry both types of debts. You're not alone! It's all about money management. If you've overextended yourself financially with some bad debt, you've got options.
On the one hand, you can revamp your budget or try to boost your income. You might be able to consolidate some debt too, which will help pay off your bad debts faster.
If like most people, increasing your income isn’t an option right now, consider reaching out to a certified debt counselor.
What is Debt Consolidation?
Debt consolidation (or debt management) is a program that allows you to repay your debt, typically at much lower interest rates and usually with reduced fees. You make one payment a month (or split the payments up) and the program pays each of your creditors. At Family Credit, we’re able to negotiate lower interest rates and fees with your creditors because we have strong relationships with them that span 25 year. Over 30,000 creditors work with us every month.
So what are some of the common benefits of our debt management program?
- Stop creditor calls
- Reduce interest rates
- Lower monthly payment
- Reduce or eliminate finance charges
- Calculate when you will be debt free
- Detailed monthly statements
- Set up automatic payments through your bank
- Secure online access to your account
- Avoid bankruptcy
- Support from our team of certified experts, every step of the way
Make a New Budget
Even if you’re not a candidate for debt consolidation, there are still ways to improve your finances! One of the best ways to help pay down your debt is to make a good budget (or spending plan, as we like to call it) and stick to it. We know this can be easier said than done sometimes! Fortunately, you've picked an excellent time to revamp your budget. Americans are living in a "Goldilocks Economy." It's a time when personal income is up, consumer confidence is high, employment rates are up, and interest rates are low!
Make the best of these fortunate times by making a thorough budget that:
- Pays your debts down every month
- Focuses on growing your savings
- Allows for a little bit of "fun" spending, so you'll be able to stick to the plan
It's okay to spend a little bit of cash on entertainment or other fun stuff if you have funds available. Never use your credit cards or dip in to your savings to have a good time.
It's essential to sit down with your significant other when planning your family finances. We think US News says it best: "A budget will never work if the adults in the family aren't on the same page. Before you start crunching the numbers, have a frank discussion with all decision-makers in the house to hash out shared and individual financial goals."
Will Professional Credit Counseling Help Me?
It might! Every situation is different, and everyone is an individual. Contact us if you'd like to learn more about how our certified credit counselors can help. Don't forget to take our quiz! It will help you decide which kinds of debt relief are best for you as an individual. After you’ve taken the quiz, you can elect to have us contact you, or request a free debt consolidation quote.