Perils of Growing Consumer Debt For The Average American

Growing consumer debt is affecting more and more people in America every month. The average credit card debt has almost been doubled in the last five years. Such situation implies many risks both for individuals and for the financial industry but banks and financial institutions fail to acknowledge this fact. Individuals, however, who suffer the consequences of growing debt more directly, should be aware of these risks and try to avoid accumulating further debt.Smart borrowing is the key to escaping from the vicious circle of debt. But prior to analyzing solutions we need to fully understand the problem. We have already stated that debt accumulation (especially credit card debt) implies certain risks for individuals. Let us examine these risks so we can figure out how pressing debt elimination is and what are the financial and budgeting solutions that we should apply.Debt Affordability CompromisedWhen too much debt accumulates, your ability to repay it is compromised. When it comes to credit card debt, it is not unusual to see people paying only the minimum payments on credit cards and still using them for purchases. If you happen to need to make only a minimum payment at any given month, then, you should refrain from using the credit card any further so next month you can eliminate as much debt as possible and reduce your balance.The continued practice of canceling only the minimum payment on credit cards leads hopelessly to debt accumulation and eventually default. Defaulting on your credit card will fatally happen if your minimum payments keep growing. It will come the time when even that payments are unaffordable and you will have to consolidate your debt or default on your credit card.As you can see, lack of affordability (which is a consequence of debt accumulation) leads to default, or bankruptcy if you do not act right away and solve the problem. The solutions are not many: A debt consolidation loan, debt consolidation services or an unsecured loan and an extreme expenses reduction plan to cope with the due payment and raise the money for the upcoming monthly payments while slowly reducing your debt.Credit Risk and Declines on Financial Product’s ApplicationsDebt accumulation, even if you do not default or pay late, will affect your credit. Too many open accounts with a high debt to income ratio will not look good on your credit report and may trigger alarms when you try to get approved for financial products like credit cards, personal loans and even secured forms of financing like home loans, home equity loans, or car loans. You may also find difficulties when refinancing if you do not keep your debt to income ratio within reasonable boundaries.Thus, debt elimination is an imperative to keep your finances healthy. You can either resort to debt consolidation or money management techniques. It all depends on how bad your debt exposure is and whether you can afford the monthly payments on your debt or you are heading towards default and bankruptcy. If you have your doubts and fear that problems are approaching, do not hesitate to request the aid of professional debt or credit consulters.