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Consumer Debt

Mortgage and Lending with Taylor Gayden Consulting

The reasons we as Americans buy on credit varies, but without it most of us would probably never be able to purchase necessities such as a home or automobile.  Some of us will not be able to survive on a monthly basis without the use of credit cards.  The nation's economy depends on credit, the promise to pay later for goods and services.  We live in the microwave age.  We want it now so we use credit to get it now.  We that credit comes consumer debt.  With the convenience of having a computer or television in the majority of the homes comes more credit charging with the end resulting in more debt turning on your television to shop the use of credit or more debt come more frequently.  With the rise in telemarketing and commercializing in America it is no wonder why Americans feel the impulse to buy now, pay later.

     The most common form of consumer debt is installment debt.  Installment debt is debt issued with the condition of regularly occurring intervals for payment by the consumer until the principal and interest are paid in full.  Simply put it is when a consumer borrows the money to purchase an item and agrees to repay the loan in equal installments over a fixed period of time.  Without installment debt most consumers could not afford to purchase the big ticket items such as a car or home.  In recent times the creative forms on installment debt has put consumers in bigger bind.  Consumer debt has risen to $14 billion in June from the previous month to a total of $2.59 trillion.  The truth of the matter is that we, as Americans, tend to want to purchase more than we can afford to purchase when we want it.   But, we can afford to pay it out, over time, in fixed payments.

     Mortgages, a debt owed on real property, mortgage debt is probably the largest form of installment debt.  There are two categories of mortgages that nearly all lenders can offer, government-backed mortgages and conventional mortgages.  Consumers have taken on record levels of debt as low interest rates; have lured them to buy bigger houses and fancier cars and to charge more on credit cards than ever before. 

     Not realizing the extent of the consumers' debt is one of the most common types of credit problem for today.   Denial may play a partial role in this problem, but the lack of education seems to be the largest reason for consumer debt.  Credit card use is up and a large number of Americans do not know the percentage rate at which the credit card companies charge.  Many credit card companies have started 'personalizing' interest rates by not disclosing the interest rate until after the consumer has received the card. By not disclosing the interest rate on the application the credit card companies prohibit the consumer from shopping around for the best deal.  You could just say they should cancel the credit card, but did you know several requests for consumer credit could be viewed negatively because the information is reported to the credit bureaus?  This leaves use, the consumer, with a bad credit report.  Household debt and bankruptcy are at record levels and appear to be on the rise.  Until we the consumers begin to educate ourselves and stop living beyond our means, we only have ourselves to blame.

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