What is Consumer Debt?
Consumer debt can come into our lives in various forms but if we do not understand its nuances, they can easily pile up and cause tensions in our personal and financial life. The purpose of this post is not to suggest ways to come out of such debt but bringing awareness of the impacts of small debt decisions we take every day.
What is Consumer Debt?
This is a debt one accumulate from household, personal or family needs. The following types of debts clearly qualify to be under this category:
|Payday Loan
This is probably the worst kind of consumer debt one can accumulate. They are short term unsecured loans and are often referred to as Cash Advances. They come at an extremely high rate of interest compounded weekly. One should try to be aware of the stores offering lucrative cash offers that may become a hefty financial burden.
| Personal Loan
This is when we borrow money for car, television or any personal or household items primarily for personal use. So next time you see offers at very low-interest rates including interest-free loan on discretionary items, BE AWARE that you are getting into consumer debt.
| Discretionary Medical Bills
Any huge medical bills incurred for non-voluntary care come under consumer debt. Some of the most popular examples are cosmetic surgeries, non-urgent dental care, expensive eyeglasses.
| Wedding Debt
Borrowing money to have a grand destination wedding comes under consumer debt. Before deciding to do so, keep it on the back of your mind that it is an accumulation of consumer debt.
| Home Mortgage
Borrowing money for one’s home(personal and family use only) is consumer debt. Most people pay monthly mortgages to banks or private lenders which is a form of repaying debt.
| Credit Card Debt
Credit card money used for personal shopping, payments, cash withdrawals is also consumer debt. Always remember! that it is the bank’s money that we are borrowing for our purchases and we have to pay that money back, (that is why it’s a debt).
| Unpaid bills for services used
This includes any household services that were used for personal consumption including but not limited to the Internet, phone, parking tickets, unpaid tax bill, monthly rent, unpaid insurance payment.
| Payouts from Divorce
This is probably an unfortunate and painful debt no one likes to get into. But all expenses in a divorce(due to personal reasons) including legal costs, child custody, and other supporting services come under consumer debt.
| Student Loan
If you are a student loan borrower, always be aware that the money you take from the third parties like banks or private lenders will increase your consumer debt level eventually.
Hope this was a useful quick read for you. As we always say Be wise with money
The material provided on moneybonsai blog is for informational use only and is not intended to be taken or assumed as financial or investment advice. Team at moneybonsai bears no liability for any loss or damage resulting from one’s reliance on the material provided. One should consult a financial professional to make financial or investment related decisions.
