How Many Americans Live in Debt Right Now?

Nowadays there are plenty of ways to get a loan. It is really useful in case of emergencies and unexpected expenses. On the other hand, this from the first sight helping hand may lead to the long-lasting debt trap.

What are the Reasons?

A lot of people resort to a payday loan, a small amount of money that is given to a borrower for a short term. The reasons can be different: redundancy, cancelling a debt, need to prepare for holidays, buying presents, bad credit history, bills, mortgage repayments, medical emergency ... the list is almost endless. A payday loan allows to get extra cash fast and easily. The only problem is that you may face a rather high interest rate – up to 30% for every $100. If you need to renew your loan, the sum grows significantly and in a few months you can find yourself facing a real problem.

Aside from payday loans, there are a lot of other options: mortgages, car loans, appliance loans, student loans, conventional loans and so on.

payday income

Facts and Figures

A survey conducted by the Federal Deposit Insurance Corporation estimates that about 20% of the U.S. population obtained payday loans or other alternative financial services for the last year. According to the Survey of Consumer Finances, the overall sum people in the USA owe to the financial institution of some kind equals $13.15 trillion, and it is 7% higher than the year before. The amount of average debt is about $5,700 per household. The Northeast and West Coast hold the highest average debt – around $8,000. Moreover, the average household with debts pays $904 in interests annually.

Concerning payday loans, the statistics provided by the Consumer Financial Protection Bureau shows that 1 in 5 payday clients ends up taking out at least 10 or more loans in succession. With each new loan, the customer pays additional fees and interest on one the same debt.The interest rate, in this case, reaches even more than 300% annually.

The majority of people attribute their debts to unnecessary purchases. About 2 in 5 Americans single out this reason as the main one. It means that if people were more cautious with their budget, the economic situation would be much better. The widest spending categories are housing, food and medication. They form 76% of expenses in the average American household. In addition, it is worth mentioning that the cost of living and healthcare is increasing more and more with each year.

About 33% of Americans who have had experience with loans and further financial problems admit that the reason they of their debt is the high price of the items essential for living. That is why they were forced to spend more than they could afford.

In conclusion, many American households face the problem of debts. Unfortunately, the number of them keeps growing each year. Expensive housing, medical care and food are to blame, as these are the main spending categories in the USA these days.