Americans are on pace to hit $4 trillion in consumer debt by the end of 2018 according to LendingTree. In 2010, they had non-mortgage debt equal to 22 percent of their income. Today, that number is 26 percent, and over the past two years, consumer debt totals have increased by 5 to 6 percent. Auto loan and credit card debts have increased by 7 percent on an annual basis.
However, with the credit card delinquency rate at 2.4 percent, most people have been able to keep such debt to a reasonable level. As interest rates continue to climb, it could be beneficial for those with high interest credit card debts to look into refinancing them. Student loan and auto loan balances generally come with lower interest rates, so rate hikes may not have the same impact on a person's finances.
To keep credit card spending to a minimum, individuals should look into using their debit card to make purchases. They can also create a budget to gain greater insight into how much money is coming in and how much goes out each month. That can make it easier to understand where to make cuts or other adjustments to a person's spending habits. On average, Americans spend 10 percent of their income on consumer debts.
Individuals who are struggling to pay their debts could turn to Chapter 13 bankruptcy as a way to ease their burden. Doing so may make it possible to retain property and put an end to creditor contact. Debt is repaid over a period of three or five years, and individuals may have any remaining balances discharged at the end of the payment period. An attorney may talk more about what types of debts are eligible for discharge.