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U.S. consumers remain reliant on debt. Read on to see what that looks like.
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U.S. consumers generally aren’t strangers to debt. People borrow money all the time, whether to finance a car or cover essential bills that are too much for their paychecks.
But recent data from Northwestern Mutual shows that American consumers carry an average debt load of $21,800. Now that sum doesn’t include mortgage debt. And it’s also lower than it was a year ago, when the average personal debt pile totaled $22,354.
But still, $21,800 in non-mortgage debt isn’t a small amount. In fact, Northwestern Mutual says that this year, credit card balances account for 28% of consumer debt. And borrowing via a credit card balance can be extremely expensive.
If you’re struggling to keep up with your debt, you should know that falling behind could damage your credit and make it very hard to borrow money affordably in the future. But there are steps you can take to make your debt more manageable.
1. Consider a balance transfer
The problem with credit card debt in particular is that the interest rate on it can climb over time, making it more expensive. Not to mention, the interest rate you’re paying may be exorbitant to begin with.
If you have good credit and owe money on various cards, you may want to look at doing a balance transfer, where you move your existing balances over to a new credit card with a lower interest rate. Many balance transfer offers, in fact, allow you to snag a 0% introductory rate on your debt. So you might get a reprieve from racking up interest for 12 months, 15 months, or sometimes even longer.
If you manage to score a 0% introductory rate on a balance transfer, one thing worth doing is picking up a side job so you can boost your earnings and free up more cash for debt payoff purposes. You’ll want to knock out as much of your debt as possible before that introductory period comes to an end and your remaining balance begins accruing interest.
2. Consolidate your debt via a personal loan
A personal loan can be a more affordable option for borrowing money than credit cards because you’ll likely be looking at a lower interest rate if your credit is in decent shape. And also, personal loans offer the benefit of fixed interest rates, so your monthly payments are predictable. That alone could make your debt easier to manage.
3. Consolidate via a home equity loan
It’s a big myth that you can only take out a home equity loan to fix or improve your property. Like personal loans, home equity loans allow you to borrow money for any purpose. But if you have a lot of equity in your home, you may find that you’re able to borrow at a lower interest rate than what a personal loan will give you.
While it’s encouraging to see that Americans have less debt in 2023 than in 2022, personal debt levels are still high. If your debt has reached the point where it’s no longer manageable, then it pays to explore these options for making it easier and more affordable to keep up with.
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