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Personal debt

Personal debt is increasing every year. It is estimated that the average US household has $19,000 in debt, excluding a mortgage. With such high debt obligations, many individuals are unable to make repayments on debts.

There are many companies offering debt consolidation services. The consumer must thoroughly consider this option, as it isn't always in the best interest of the consumer. Many quick debt solutions involve mortgages taken out on homes. It is often in the consumer's best interest to turn to an independent consumer's association for advice before turning to a debt consolidation companies. There are many financial advisors out there that have experience with debt solutions and financial planning.

Personal debt is defined as any consumer credit that is outstanding. In macroeconomic terms, it is debt which is used to fund consumption instead of investment. Some consider all debt incurred for anything else other than investments to be unwise, while others believe that consumer credit is beneficial in helping the economy grow further. The difference between these two perspectives is most often a matter of personal values, which later manifest into widespread social biases.

Historically, across many cultures, being in personal debt was considered almost immoral and called for contempt from peers since it implied that the debtor did not have ample financial strength to back his requirements. More recently, an alternative analysis reveals that consumer debt can also be looked at as a way to increase domestic production. If credit is readily available, the increased demand for consumer goods should also cause an increase of overall domestic production. Both domestic and international economists have supported a recent upsurge in the South Korean consumer debt for instance, which has helped fuel economic expansion and hence opened up new doors to improvement. On the other hand, credit card debt is almost unheard of just across the sea in Japan and China, this is considered to be so owing to long standing historical biases against personal debt and also possibly due to the economy still being underdeveloped, as is the case with China. Theoretical reasoning aside, personal debt is surely on the rise, particularly in the United States of America.

The most common form of consumer debt have been seen to be credit card debt, payday loans, and other consumer finance, which are often at higher interest rates as compared to long term secured loans such as mortgages. Interest rates vary for each of these depending upon the current economic situation along with the financial status of the individual; about 12-15% per annum is usually considered the norm.

Long term personal debt is often considered to be fiscally suboptimal. While some consumer items may be useful investments and do justify debt, such as in the case of automobiles which are usually but not always exempted in discussions of consumer debt and business suits, most consumer goods do not justify the debt. For instance, incurring a high interest personal debt through buying a big-screen television now, rather than saving for it, can not usually be financially justified by the subjective benefits of having the television earlier.