How Did We Get In Debt This Badly

Written by on June 14, 2012 in Money - No comments | Print this page

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Understand Debt To Get Out Of It.

The Burden Of Debt Is Becoming Unbearable. How Did We Get Here.

We are a nation being crushed by the weight of too much debit. For decades we have been forgone living paycheck-to-paycheck by instead living credit card-to-credit card. Now all of that is coming to an end. More and more people are having their lives ripped apart as those debts finally come due, banks are forced to write off bad laons, and the entire financial system is collapsing in on itself.

How did this occur? How did we reach this point?

There are many culprits.

Easy Credit

Within their first few months of college, students will begin recieving dozens of credit card offers for credit cards. Rent-to-own appliance stores and buy-here-pay-here car dealerships are popping up all over the country. Anyone can get anything they want with no money down. For people that don’t think ahead this can be a disaster.

Cheap Credit

For people with good credit interest rates are at historically low levels and have been for a long time. Even before the financial crisis interest was ridiculasly low. This makes it a lot easier and smarter for individuals to take out loans on major purchases such as houses and cars.

Rising House Prices

In many ways this was and is the center of the debt bubble. Higher house prices push the total debt up in two ways.

  • It forces people that want to buy homes to pay higher prices. This of course means that they are going to have to borrow more to purchase what they want. This also means that saving for a down payment is less realistic as the price of that payment is out of reach.
  • People that bought their homes before the mass run up of housing prices now have a very good ratio of their net worth to debt as they have a lot of equity in their houses. This makes it very easy to get a secured loan against their homes.

Attitude to Debt

The majority of our grandparents hated debt. The idea of owing someone else was something that previous generations could not stand. Today it is commonplace and accepted. This blasé attitude will likely change as the troubles caused by high debt become known to all.

 

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About the Author

Matt Brand

Matt Brand is QLR's money saving expert. His experience with credit cards and student loans have made him take a strong interest in personal finance, saving money and sharing his knowledge. He is passionate about teaching others how to avoid the trap and make smart financial decisions. View all posts by Matt Brand.