Consumer Debt Relief

Road sign showing consumer debt and financial freedom in opposite directions

Whether we are in the grip of a slowdown or recession depends upon which expert you’re listening to. Whatever you call it, our economy has brought about the need for consumer debt relief like never before.

In these troubling times, many Americans are taking advantage of consumer debt settlement as the best option for those overwhelmed by consumer debt. With the need for consumer debt relief growing, there are thankfully some options available for those that are looking for relief, and based on the specific financial situation that someone is in, one solution may be better than the other.

What is Consumer Debt?

Also known as consumer credit, consumer debt is any debt resulting from purchases made by individuals or households as opposed to debt incurred by businesses or the government. This form of debt can have higher interest rates than other types of financing, which can make it more difficult to pay off.

Consumer debt is used to fund the purchase of goods for consumption, not those for investment. Examples of consumer debt include credit card debt, mortgage loans, auto loans, personal loans, retail credit cards, and Home Equity Lines of Credit (HELOC).

Types of Consumer Debt

There are several types of consumer debt, but they can be broken down into two main categories: secured and unsecured.

  • Secured consumer debt debt is backed by collateral, such as a home loan or car payment.
  • Unsecured debt is not backed by collateral, such as medical bills and credit card debts.

Credit card debts are unsecured accounts often sold to collection agencies when balances remain unpaid for more than 180 days. Types of debt include credit card debt, mortgage loans, auto loans, personal loans, retail credit cards, and Home Equity Lines of Credit (HELOC).

Consumer Debt Statistics

In the first quarter of 2020, the Covid-19 pandemic caused widespread economic uncertainty that led to recession-like conditions in the United States. As a result, consumer debt great by over $800 billion in 2020, bringing the total close to $15 trillion.

According to Experian, the largest growths in consumer debt occurred in student loan debt, mortgage debt, and personal loan debt. American mortgage loan debt rose to an all-time high of over $10.3 trillion, auto loan debt reached an all-time high of over $1.3 trillion, and student loan debt also reached an all-time high of nearly $1.6 trillion. On the other hand, credit card debt saw its largest annual decrease in nearly a decade, so not all forms of consumer debt were affected by the 2020 recession equally.

The average level of consumer debt held by Americans reached over $92,700 per consumer in 2020, which is comparable to the average consumer debt held in 2010, when debt levels spiked after the great recession of 2008.

Consumer Debt FAQs

Why is consumer debt so high?

There are several reasons why consumer debt is so high. One reason is that living costs have increased while incomes have remained stagnant. This means that people have to spend more money on essentials like housing and food and don’t have as much left to save. Another reason why consumer debt is high is that credit has become more readily available. This means that people are more likely to use credit cards and take out loans, even if they can’t afford to do so. The availability of credit can be tempting, especially when people are facing financial difficulties. Thus, high consumer debt levels can be attributed to macroeconomic factors and individual choices.

What happens when consumer debt is high?

When consumer debt is high, it can have several negative consequences. First, high levels of consumer debt can lead to financial instability. If consumers carry a lot of debt, they may be more likely to miss payments or default on their loans. This can cause serious financial problems for individual consumers and the economy as a whole. Second, high consumer debt levels can also lead to higher interest rates. When lenders see that consumers carry a lot of debt, they may be less likely to extend credit or charge higher interest rates on loans. This can make it more difficult for consumers to get the credit they need and make it more expensive to borrow money.

What Type of Debt Has the Highest Consumer Debt Balance?

In the United States, mortgages have the highest consumer debt balance at $10.9 trillion, followed by student loans at $1.6 trillion, auto loans at $1.5 trillion, and credit cards at $856 billion by the end of 2021.

Types of debt with the highest consumer debt balance, in order of highest to lowest:

  • Mortgages
  • Student Loans
  • Auto Loans
  • Credit Cards

These are four types of consumer debt that carry high balances. They’re also among some of America’s most common forms of debt. If you’re struggling with any of these debts, it may be time to consider a consumer debt relief program. A consumer debt relief program helps individuals get out from under their debts—and it can be an essential first step toward getting your finances back on track. For example, if you owe more than you can afford on your own, a professional service might negotiate with creditors for lower interest rates or reduced payments.

Consumer Debt Relief Programs

Millions of Americans are struggling to manage their debt as their income shrinks. They may want to ask for advice, but don’t know who to consult regarding consumer debt relief. So, let’s look at legitimate solutions.

  • The first solution is to realize you need help to get out of the trap. The help could come in the form of consultation or intervention.
  • Secondly, you need to select a solution according to your financial situation. If your credit card debt is not too big, you may be able to approach bank yourself and negotiate for a discount or a repay plan.
  • If your debt is over $10,000 you should look for help from consumer debt settlement professionals. They can guide and assist you as well as undertake negotiations to reduce your liability more than 50 percent.

Legitimate solutions for consumer debt relief can be arrears settlement or liability consolidation. With the help of a reputable settlement company, you can find consumer debt relief without having to resort to bankruptcy. If you are someone that is looking for consumer debt relief options, give us a call at 1-800-527-4421 today and one of our debt relief experts will discuss your options for managing your debt with you.