More Americans have debt than do not, but it’s not always a topic you hear people talking about openly. So, it can come as a relief to find out many of your family members, friends, coworkers and neighbors may be dealing with similar financial challenges — you’re by no means alone if you’re not quite sure what to do about your debt.
A recent survey from LendingTree found nearly 60 percent of Americans felt weighed down by debt heading into 2020, although slightly more than half of respondents feel optimistic about their ability to get ahead financially in the coming decade. The survey also took a closer look at exactly which kinds of debt are most stressful to people.
Here’s a closer look at the five types of debt stressing out Americans the most right now.
1. Credit Card Debt — 36.7 percent
It makes sense that credit card debt seems to be weighing most heavily on the minds of Americans with debt. It’s easy to open a credit account but much tougher to pay down any balance you carry from month to month. Why? Because interest rates on credit cards tend to be higher than other forms of debt.
As USA Today reports, the average balance on a credit card is nearly $6,200 — and the typical American holds four cards. Furthermore, credit limits have risen over the last decade which means cardholders have more wiggle room to keep accumulating debt over time.
Many credit cards carry an interest rate between 15 and 25 percent, which means balances can accumulate interest charges quickly. The compounding nature of credit card interest means the principal balance racks up interest at the aforementioned rate, and interest charges do so as well once they’re applied. So, interest begets more interest. It’s a tough cycle to break.
Many Freedom Debt Relief reviews cite out-of-control credit card debt as a key reason for enrolling in debt settlement — a testament to the fact it can be difficult to pay down credit card debt on your own.
2. Student Loans — 20.7 percent
College lasts a handful of years, but student loans can plague graduates for years, or even decades afterwards. Here are a few illuminating statistics about student debt in America, courtesy of Investopedia:
- There is about $1.41 trillion of cumulative outstanding student debt in the U.S.
- The average amount of student debt per borrower is $35,359.
- Over 14 percent of adults have at least one student loan.
Seeing as student debt can affect decisions about where to live and work — and cause graduates to have to delay life milestones as they prioritize repayment — it makes sense this category captures the second-place spot.
3. Medical — 13.7 percent
Americans with and without insurance are vulnerable to experiencing medical debt. The cost of healthcare is high and it’s by no means a predictable expense. Around two-thirds (66.5 percent) of all bankruptcies filed in the U.S. are related to medical issues — either outright expensive bills or time away from work.
The best defense is building up an emergency fund ahead of time. If you find yourself footing medical expenses, try to negotiate those costs down and determine your eligibility for a payment plan rather than putting them on a credit card.
4. Mortgage — 12.4 percent
Mortgages are very common, but it falls lower on the stress list likely because the interest rates tend to be lower than other forms of debt and payments tend to be fixed over a very long term.
5. Personal Loans — 11. 7 percent
Personal loans come in fifth place, generally offering interest rates higher than mortgages but lower than many credit cards. Due to the fixed nature of payments, some Americans use personal loans to consolidate their credit card debts to reduce how much they pay in interest.
There’s no doubt debt can be very stressful, and these represent the top five types of debt weighing on Americans’ minds right now.