So what is the average American household debt?
According to Nerdwallet, the average American household owes:
- $170,000 – mortgage
- $48,000 – student loans
- $27,000 – car loan
- $16,000 – credit card debt
Surprised? So were we.
The average American household owes more than $250,000
Owing more than a quarter of a million dollars, is a huge amount for many people to think about.
It’s not surprising that so many people panic if the financial circumstances change in their household.
This goes some way to explain why a job loss, reduction in hours, an unexpected bill, or a sudden medical expense can have such as dramatic effect on household finances, and is the final straw for many people.
Don’t have a mortgage or car loan?
Even if you rent your home, have paid for your car outright and don’t owe student loans, you may still have other borrowings such as a loan or you may use credit cards more than you’d like to.
You might still owe more than you can afford to pay back. Do you resort to applying for loans or using your credit cards for everyday items as your paycheck just doesn’t seem to last you all month?
The value of property tends to rise over time, so many people with a $170,000 mortgage will have a home worth considerably more than they paid for it.
Currently for 2016, Nerdwallet suggests that it property prices will rise by 4-5% as demand increases faster than supply.
However, during financial crises such as those suffered recently, property values can fall, which means that people owe more on their home than it is worth.
Some people will discover that their home is not worth anything like what they still owe on it, and they can’t sell it because nobody want to pay more than it is worth. This leaves them stuck with a house they can’t afford or sell.
On average, a new car will depreciate around 20% during the first year; 10% the moment it is driven off the forecourt.
During the second and third years, it will depreciate another 15%, meaning it is only worth around 75% of what it cost new.
According to CheatSheet you could save as much as 33% by buying a year old car compared to a brand new one. Whether you want a Mercedes S Class or a Mini Cooper, choosing a car that depreciates quickly over the first year can be a smart move.
Factor in interest, and the fact that some cars will depreciate by much more, and it’s easy to see how people are paying off a car worth far less than their loan.
More bankruptcy statistics
We’ve rounded up some more Bankruptcy Statistics so you can see how bankruptcies in Minnesota compare to those in other states.
- Want to know how Minnesota compares to the states with the highest and lowest number of bankruptcies?
- Want to know how Minnesota compares to the states with the highest and lowest bankruptcies per capita (1000 people)?
- Want to know how Minnesota compares to the state with the highest number of Chapter 7 bankruptcies?
- Want to know how Minnesota compares to the state with the highest number of Chapter 13 bankruptcies?
If you need help and advice to see whether filing for bankruptcy is right for you, why not fill out our Free Bankruptcy Evaluation form?