IT IS IMPORTANT TO KNOW YOUR RIGHTS to be able to reduce the amount of your debt and its adverse consequences. Photo Credit: Wayhome Studio, Adobe Stock
Let’s get straight to the point. Americans are drowning in debt, and it’s getting worse. Mortgages, credit cards, auto loans, student loans, and personal loans are all ballooning, leaving many households on shaky financial ground. The numbers don’t lie, and if we don’t get serious about managing debt, financial ruin will become a reality for millions.
Some people will argue that debt is a normal part of life. “You need credit to get ahead,” they say. “Debt helps build wealth.” Sounds like something bankers and marketers would say. You buying into this philosophy certainly helps them build wealth. If you believe in the hype, you’re drinking the Kool-aid. Let me be clear—debt isn’t the problem, it’s a symptom. How you manage debt determines whether you stay financially stable or end up broke. Let’s break down the state of debt in America and what you can do to stay in control.
The State of Household Debt
Mortgages: The Cost of Homeownership
- Total Balance: $12.52 trillion
- Average Balance per Borrower: $237,000
- Average Interest Rate: 6.96 percent (30-year fixed)
- Average Monthly Payment: $1,700
The American Dream comes with a hefty price tag. Mortgage rates have doubled in recent years, and home prices remain inflated. The result? First-time homebuyers are getting priced out, and homeowners with low interest rates are afraid to move because they’ll have to take on higher payments. If you’re buying a home now, be smart—don’t max out your budget. A house is a home, not a financial trap.
Credit Cards: The Silent Wealth Killer
- Total Balance: $1.08 trillion (an all-time high)
- Average Balance per Cardholder: $5,947
- Average Interest Rate: 21 percent
- Current Trend: More people are relying on credit to survive
Credit card debt is the most expensive and most dangerous type of debt to carry. The average American is paying over 20 percent in interest—more than double the rate of some personal loans. If you’re only making minimum payments, you’re in a financial death spiral.
Here’s the hard truth: Banks and credit card companies want you in debt. That’s how they make money. Break the cycle—pay off your balances as fast as possible, avoid unnecessary purchases, and stop treating credit cards like free money.
Auto Loans: Automobiles can drive you broke
- Total Balance: $1.63 trillion
- Average Balance per Borrower: $24,490
- Average Interest Rate: 6.61 percent (new cars)
- Average Monthly Payment: $737 (new cars)
Let’s be real—cars are getting way too expensive. A basic new car now costs $40,000, and loan terms are stretching beyond 7 years. Some people are paying more for their car than their rent!
Want to avoid the trap? Follow this golden rule: If you can’t afford to pay it off in three years, you can’t afford it. Buy used, shop smart, and don’t let a dealership talk you into financing a car like it’s a mortgage.
Student Loans: Going to school to get a job to pay for school
- Total Balance: $1.77 trillion
- Average Balance per Borrower: $37,000
- Average Interest Rate: 9.08 percent (federal loans)
- Average Monthly Payment: $393
Student loans were once seen as a path to a better future. Now, they’re shackles keeping borrowers from building wealth. With the cost of education rising, young adults are starting their careers in financial handcuffs.
Here’s the deal—college isn’t the only path to success. If you or your kids are considering college, think long and hard about whether the debt is worth it. Look at trade schools, scholarships, community colleges and local colleges before diving headfirst into massive student loan debt.
If you already have student debt, attack it—look into forgiveness programs, refinance only if it makes sense, and pay extra when possible. Don’t let it linger for decades.
Personal Loans: Debt to Pay Debt
- Total Balance: $225 billion
- Average Balance per Borrower: $11,652
- Average Interest Rate: 14.36 pecent (for good credit)
- Average Monthly Payment: $270–$350 (terms of 3–5 years)
Personal loans can be useful, but they’re often a sign of a bigger financial problem. Too many people use personal loans to consolidate debt, only to rack up new credit card balances a few months later.
If you’re using a personal loan to stay afloat, you don’t have a loan problem—you have a spending problem. Budget smarter, increase your income, and break the cycle of borrowing to survive.
How to Regain Control of Your Finances
Now that we’ve established how deep the debt crisis runs, let’s talk about solutions.
Stop Adding More Debt
Stop borrowing! This might seem obvious, but if you’re already struggling, don’t dig the hole deeper. Cut up your credit cards, delay unnecessary purchases, and live within your means.
Create a Debt
Payoff Plan
Use the debt snowball method (paying off the smallest debts first) or the debt avalanche method (paying off the highest-interest debts first). Either way, make a plan and stick to it.
Refinance Where Possible
If you have high-interest debt, refinancing or consolidating to a lower rate could save you thousands. But be careful—don’t just extend the length of the loan and end up paying more over time.
Cut Expenses and Increase Income
If you’re struggling to make debt payments, your financial equation needs to change. Cut out unnecessary expenses and find ways to increase your income. A side hustle or job change could be the difference between staying in debt and becoming debt-free.
Build an Emergency Fund
Many people rely on credit cards because they don’t have savings. Start with a small emergency fund ($1,000) and build it up to cover 3-6 months of expenses.
Final Thoughts: Take Control Before It’s Too Late
Debt is a financial trap that too many Americans fall into, and it’s only getting worse. The system is designed to keep you paying interest for life—but you don’t have to play that game. Take control of your money, prioritize paying off debt, and make smart financial decisions that set you up for long-term success.
(Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website at www.damonmoneycoach.com)
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