Many of us set objectives for the forthcoming year at the end of each year. While some people use the time to work on addressing their health-related difficulties, such as adhering to a healthy diet or engaging in regular exercise, others use it to finish a project that has been put on hold for a long time. While many people establish financial objectives for themselves, far too few people take steps toward fulfilling their financial commitments and becoming debt-free, despite the fact that doing so would significantly increase their chances of achieving such goals in the future.
Fewer individuals in the United States appear to realize the value of paying off debt. Credit card debt alone amounted to slightly under $1 trillion in outstanding balances for US customers by the end of 2019. Student debt is now the second most common kind of debt in the United States. One way to avoid getting farther into debt is to pay off what you already own rather than merely increasing your savings and decreasing your expenditures.
People in the United States have to deal with debt from a young age, which is a sad reality for many people throughout the country. For many years or even decades after graduation, many college grads are burdened by the student loans they incurred while in school. There are an estimated 42 million Americans who have student loan debts totaling $1.5 trillion that they are unable to get rid of.
Inflation-adjusted salaries have been almost unchanged over the previous 40 years while the expenses for the property, medical care, and higher education have risen dramatically. People are increasingly reliant on debt as a source of income. According to a recent poll by CreditCards.com, over half of all individuals in the United States (47 percent) have some kind of credit card debt. More than $6,000 is owed by the typical family.
Taking on extra debt may have an immediate impact on you and your family.
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- There is a limit to the amount of credit card debt you may carry. The lower your credit score, the greater the risk of increased interest rates and deterioration of your financial stability.
- If you use a credit card, you’ll have to pay extra interest each month since the interest rates are so high: the average is 17.4% APR. Because of it, lenders will be forced to pay more interest out of their paychecks.
- Make it impossible for you to buy the things you truly desire – That choice will be eliminated, at the very least, if the large monthly payment continues to accrue interest. Debt-free living allows you to spend more money on the things you really want.
- Expanding into new initiatives like a business loan or debt refinancing will be more difficult if you have a lot of loans to deal with.
- Many borrowers make the mistake of not doing their research before taking out a personal loan. It’s possible that you’ll lose out on your financial objectives if you choose a debt consolidation loan deal that isn’t precisely what’s best for you. That’s all the more reason to check out our article on personal loan blunders to avoid.
- Anxiety over money might be brought on by a lack of income, mounting debt bills, or fear of debt. Stress has been proved to be a severe threat to one’s physical and mental health, and it is something we should all strive to reduce. Nearly half of those polled by CreditCards.com report feeling stressed out because of their current credit card debt.
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Long-term financial obligations, such as school loans, exacerbate financial stress. You may learn more about refinancing these types of loans here.
In 2020, the pandemic of COVID 19 ravaged the world, making it a difficult year. This has resulted in a 42% increase in credit card debt among Americans. The CreditCard.com research found that 23% of individuals had increased their debt as a result of the pandemic, particularly among the younger generation, with 34% of millennials reporting a rise in their overall debt.
Job losses have exacerbated the economic woes in both the United States and the rest of the world. As a result of the general sense of apprehension felt by Americans, new patterns of consumer behavior have emerged. Over 40 percent of Americans said they solely use their credit cards to make purchases. Among other things, this is because brick-and-mortar establishments have been shutting and other constraints have led to an explosion in internet shopping.
When it comes to increasing your borrowing limit, there is also a demographic factor involved. When compared to people in the suburbs and rural areas, city dwellers have increased their usage of credit cards by 25 and 22 percent, respectively, over pre-pandemic periods.
Retailers are on edge as we approach Black Friday and the Christmas shopping season of 2020. In November and December, they don’t know how consumer spending would turn out because of the ongoing epidemic. A considerable increase in personal debt was commonplace prior to the outbreak. Most people paid off their Christmas debt in one to three months, while 16% of those who owed $1,325 or more owed it for five months or more in 2019 alone.
Could this be a good moment to consider a debt-free lifestyle? Due to the COVID-19 pandemic, there may be fewer family gatherings, fewer individuals traveling, and hence fewer presents and spending. Some people will be able to reduce their credit card debt in some way as a result of this.
What does it imply for each and every customer to consolidate or reduce their debt?
You won’t have to rely on credit card firms or other lenders for your financial security. How much you have to pay each month and the interest rate on your credit card is entirely up to them. With only a few months’ notice, they may be able to increase your minimum payment or interest rate.
You have the opportunity to own your own property. Foreclosure may occur if a borrower fails to make payments on an automobile loan. The same holds true when it comes to a home and its mortgage. Secured debts are those in which collateral is used as a form of security, and when the debt is paid in full, the asset is yours to do with as you see fit.
All of these benefits, as well as a few others, lead to greater levels of personal autonomy. Stop borrowing against your future earnings to achieve financial independence and a debt-free existence. Every time you take out a loan or make the minimum payment on your credit card, this is what occurs. The following several months or years will see you taking out a loan against your salary. All of this contributes to a never-ending cycle of debt that lowers the current and future well-being of all those who get caught up in it.
The conclusion of what has been a difficult year for everybody, maybe it’s time to make a commitment to modify your household’s attitude to debt management and reduction. In order to help our customers make well-informed decisions about taking out personal loans, consolidating debt, or refinancing student loans, we at are here to assist you.
