In the United States today, it is nearly impossible to go through life without acquiring any sort of personal debt. This is because with the evolution of credit and lending as we see it today, the world economy was able to flourish under the pretense that consumers can make large purchases without actually having the full funds available at that point in time. Without this ability, consumers would likely not be purchasing their properties or cars outright, nor would students be able to attend college. Frankly, without credit, the world economy as we know it would not exist. However, while some personal debt is not only expected, but almost guaranteed, consumers are still advised to keep track of their personal finances and avoid making extraneous purchases on credit.
Despite this advice, the average adult consumer in the United States today has over $8,000 in credit card debt alone and carries about 9 different credit cards that they use frequently. With this amount of debt, the consumer likely need only pay about $15 minimum toward each line of credit, which would give them a monthly payment of about $135. However, without calculating interest payments, this process would likely take the consumer 60 months to pay off, or 5 full years! Plus, if the consumer continues to use their credit cards, this can be a nearly never-ending cycle. However, as long as the consumer makes their monthly payments on time each month, they will be able to handle this credit card debt without their credit score suffering. In the United States today, it can be difficult for consumers to keep track of their debt obligations and make their monthly payments on time with the current state of the job market.
After the financial crisis of 2008, many areas of the nation faced crippling unemployment rates of over 15%! Today, even 3 years after the crisis, the unemployment rate still stands at over 9% across the states. This means that although the economy is on the mend, it is improving very slowly, which makes it difficult for many Americans to find stable employment. This is especially true of certain industries that were decimated by the financial crisis, such as the financial, automobile, and real estate markets. When a consumer is forced to remain without a steady form of income for a long period of time, they will likely not be able to meet all of their debt obligations.
This is a very slippery slope in today’s economy, because once the consumer misses their credit card payments, their accounts can be reported as delinquent to various collection agencies, resulted in a vast drop in their credit score. In order for these consumers to seek restitution for their credit card debt, it is recommended that they seek credit counseling services in their area. Credit counseling services are now being offered at local state and federal government buildings, which allows consumers in financial need to have their personal finances looked over by a professional credit counselor. Once their finances are evaluated, the credit counselor will likely advise the consumer to seek debt consolidation or bankruptcy.
While bankruptcy is often necessary for those Americans with vast amounts of credit card debt and absolutely no means to pay it off, it is strongly recommended that they avoid bankruptcy at all costs. With debt consolidation, the consumer can have their debts immediately lowered if they agree to pay off all of their debts at once. The consumer will do this by taking out a new consolidated line of credit, which they then use to pay each lender individually, including credit card companies, banks, and credit unions!