A Look at Debt

Debt is a bad thing; there is no question about it.  Debt means owing money to a person or an institution that you have to pay off.  Until your debt is paid off, your money is not truly your own.

These days we associate debt with people who earn less money.  After all, it stands to reason that people who make more money don’t need to take out loans and would be able to pay off their credit card bills every month.  But this kind of thinking isn’t necessarily accurate or true.

Something like a third of the country lives paycheck to paycheck meaning that they don’t have a safety net if they were to lose their job, and this is bad.  Unfortunately it doesn’t seem to matter what your income level is, as this problem affects people at all income levels and even levels of education.

There are two main types of debt: credit card debt and loans.  Other kinds of debt exist, but for the purpose of this article we will only focus on these two.

Credit card debt comes from not being able to pay your credit card bills fully and having the balance carry over from month to month with the balance often increasing and interest growing.  The longer you pay off this bill, the more your debt will grow.

Loan debt is a different story.  There are a few different types of loans: personal loans, student loans, home loans (mortgages), and so on.  Unlike credit card debt, loans are usually taken out for a specific purpose like a college education or a specific purchase like a car or a house.  These loans also come with interest and the longer you take to pay off these loans, the more you will pay in interest.

Debt isn’t just for people who don’t have any money.  Certain types of loans mean that you have made certain types of purchases.

To get a loan you must qualify for the loan.  The bigger the loan, the more strict the qualifications are which is as it should be because the bigger the loan, the harder it is to repay, especially if you don’t have the means to repay.  But that is what the qualifications are there for.

The real problem with debt is credit card debt.  There are much less strict rules for getting a credit card than for getting a mortgage.  After all, a mortgage is usually much bigger than most credit card debt.

According to Bankrate.com, more than 40% of American households spend more than they earn.  This means that not only are they living paycheck to paycheck, they are relying on their credit and creating even more debt for themselves.

This frightening statistic shows what a credit based consumer culture we live in.  Americans are buying things with money that they don’t have, and the more they do this, the more expensive these purchases become.

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