Mortgages account for the largest portion of household debt with about $9 trillion owed as of early 2017. Credit card debt follows closely behind at around $800 billion dollars while auto loan debt stands at around $1 trillion dollars. With wages stagnant or decreasing for many Americans, it is becoming increasingly difficult for them to pay off this mounting debt load without help from outside sources such as government assistance programs or private loan consolidation companies.
The rise in household debt has caused some experts to worry about its implications on the health of the overall economy as well as individual households that carry this burden. High consumer debts can lead to reduced spending by individuals which decreases economic growth and could potentially increase unemployment rates if businesses don’t have enough customers buying their products or services. Another concern is that high levels of household debt could lead individuals into bankruptcy which would further weaken the economy due to decreased spending power and loss of tax revenue from those individuals filing bankruptcy petitions under Chapter 7 or 11 protection laws.
To combat this problem, legislators have proposed various measures including providing tax incentives for those paying their debts off quickly, strengthening education initiatives around financial literacy so consumers understand how best to manage their money, and encouraging banks to provide more flexible payment options such as interest-only payments on certain types of loans. Though none of these measures are likely to completely eliminate the problem they could help ease some financial stress on households across America who find themselves increasingly weighed down by mounting household debts.
