The credit card purchases and mortgages showcase the purchasing ability of the common people in the country. Again, these factors derive the modern American economy, as well. Recently, the Americans have reached an alarming $ 14 trillion in debt, which has become a matter of great concern for the policymakers today. The total amount of debt includes Credit Card debts, Student Loans, Mortgages, and various other forms of debts too. Some of the most important reasons behind this figure of debts are reduced unemployment, the confidence of the general consumers, and lowered interest rates for borrowing for enormous reasons.
Presently, the mortgages from various banks and financial institutions account for the highest share of the total debt. Currently, the total of mortgages as debts accounts for about $ 9.5 trillion. We can notice a considerable hike of 0.3% in this segment compared to the last quarter. Similarly, there is a substantial increase of about 1.4% in the Student Loans, and the Credit Card Balances have reached $13 billion. Though the overall debt implies the spending by the consumers, the economy may face crucial difficulties shortly. If the Americans face another recession, causing a drastic fall in the employment rate, the consumers may find it too difficult to repay.
We had seen a drastic hike in housing finances in the last decade, deriving a significant part of the US economy. Now, as the overall economy of the country is much larger, it seems that the economy might be able to handle more debts. However, the household debt to income ratio needs to be stable for the timely repayment of these different forms of debts. Fortunately, for now, this ratio is smaller, and it is declining gradually. This is a good sign, and we can hope that the economy would sustain the debts, leading to multidimensional growth. This is an alarming situation for the consumers that don’t possess a realistic roadmap for repayment of debts too.