Consumer Debt: The Good, the Bad, and the Risky
For American consumers, there’s some good news with respect to their debt levels. In the second quarter of 2012, Americans continued to reduce their credit card debt, down to just $672 billion or 22 percent from 2008 highs. Credit card debt is one of the most dangerous forms of lending for debtors because of its high interest rates, floating rates, and hidden charges and penalties.
The lending picture isn’t uniformly rosy, however. Across the country, car loans have increased significantly, and in Dallas, key housing indicators suggest a softening housing market. Nationally, debt related to automobile purchases increased by $13 billion in the last quarter, up to $750 billion, as consumers fulfilled postponed needs. While automobile purchases suggest consumer confidence and represent more of an investment than pure consumption, greater personal debt during a soft recovery can be dangerous.
Likewise, in Dallas, housing – the largest single source of consumer debt per capita – has fallen off of late. For instance, the last month has shown a decline in average listing price and number of listings. Additionally, one-bedroom residences, precisely the homes that struggling debtors are most likely to own, have fallen 16.5% in average value during the last year. As home values decline, struggling debtors lose their last major store of value and may be forced to confront a dire financial picture.
In general, debtors don’t fall into financial distress over night. Likewise, it’s wrong for consumers to think that they’ll solve their financial problems quickly either. What you need whether you’re considering bankruptcy or trying to avoid it is a plan. The dedicated and experienced attorneys at the law firm of Fears Nachawati know how to advise clients like you and can offer you the advice and recommendations you need. Call us for your free consultation today.