What Are the Most Common Types of Debt for Your Age Group?

With debt being such an overwhelming subject to deal with, it can be easy to forget that it is a problem that impacts millions of people every year. Whether you are a relatively new borrower at only 18 years old or have maintained a well-seasoned financial history for decades, there is a constant stream of debt potential. There are many types of debt out there and, depending on your age group, you may be more susceptible to certain kinds. Luckily, Liberty Debt Relief  has all the information you need to prevent falling for financial traps.

Common Types of Debt By Age Group Infographic

So many Americans live with different types of debt. Liberty Debt Relief is here to help you determine what types affect your age group* most.

  • 28% of debt for 18 to 24-year-olds is from student loans.
    • Credit card debt is the second highest debt for this group.
  • 1/4 of the debt for 25 to 34-year-olds comes from credit cards.
    • 16% of their debt is student loans, while 3% is mortgages.
  • 32% of the debt 35 to 49-year-olds owe is related to home mortgages.
    • This is followed by credit card debt and vehicle loans.

Source: CNBC

Ages 18-24: Student Loans

The cost of attending college only continues to grow. In fact, the cost of college from 1998 to 2019 has increased by more than $20,000, which is why it is no surprise that so many young adults are suffering with student loans. In many cases, students do not leave college without obtaining at least $25,000 in student loan debt, which can take decades to pay back between high interest rates and finding a job that pays enough to make all the loan payments.

While there are various types of consumer debt, this is one of the easiest to get trapped into. Young adults are constantly told to pursue college so they can get a good career, which is definitely a good choice, but for those who have no choice but to rely on student loans, it can also be a financially devastating move. Only six months after graduating, you will have to begin paying back your loans and, by that time, they have already accrued months or even years of interest.

To avoid falling further into debt during college, consider finding a part-time or summer job so you can limit the number of loans you have to take out initially. Of course, you can also seek a debt settlement if you hold private student loans and you are experiencing a serious financial hardship that is keeping you from paying on your accounts.

Ages 25-34: Credit Cards

One of the most common types of debt across the board is credit cards. While everyone seems to have one, 25- to 34-year-olds seem to have the biggest issue in paying back their credit card debt. The average debt in this category across the United States is nearly $6,000 and, when you consider the high interest rates, it is really no surprise that so many people end up in crippling credit card debt.

Another reason people of this age group so easily end up with this debt is because, almost as soon as you get one credit card, essentially every financial company starts sending credit card offers. People in this age group are still pretty new to debt management and many make the mistake of opening up multiple credit cards and spending thousands of dollars on their credit lines every month that they can’t afford.

The best method of defense for this group is to avoid opening up multiple lines of credit. Even if you feel like doing so would be affordable, there is really no way to guarantee that the same income you have this year will be the same you have the next and there is a good chance you will overspend. Secondly, make sure to create a budget that you are confident you can stick to. If you are ever unsure about your financial situation, it is also a good idea to reach out to friends or family who have experienced a similar situation or work with an accredited debt relief company. Finally, if you’re already in over your head, credit card debt settlement may be an option for you.

Age 35-49: Mortgages

Mortgages are a type of consumer debt that often goes forgotten but is very impactful. At this point in one’s life, they often want to go from apartment hopping from year to year to really settling down and purchasing a home and a mortgage is often the answer. For those who are truly suffering from debt, they may have to take out a second mortgage just to be able to afford their day-to-day life.

To avoid going into mortgage debt, the best thing you can do is avoid purchasing a home that you cannot eventually pay off for the most part. While renting an apartment or a home may not be your ideal life, it can save you thousands of dollars of debt in the long run. If you really have no choice but to take out a mortgage, there are also some things you can do to avoid additional costs. Make sure to find out if there are any prepayment penalties, and if not, make as many extra payments toward your principal balance as you can. It is also in your best interest not to extend your repayment plan and to make sure your loan is set at a fixed rate.

Age 50+: A Diverse Mix

While older individuals typically have the lowest amount of overall debts out of all the age groups, they do typically have the most diverse debt portfolio. Because they have had more time to develop a financial history, they typically have a larger mix of credit card, mortgage, loan, and many other types of debt. Another problem in this group is that many do not have a lot of savings available and, therefore, do not have a safety net for the debt as they get closer to retirement.

For this group, it is essential to have as much money saved as possible so expenses and debt won’t ruin your retirement. This could be in the form of a corporate or government-sponsored savings plan, such as a 401(k), or even a general savings plan that you have regularly contributed to over the years. However you choose to do it, make sure to have enough saved up that you can live off of if need be while also diminishing your remaining debts.

Know What to Expect

Knowing the types of debt that generally affect people within your age group, as well as others, allows you to take actions that prevent you from falling into financial traps. Liberty Debt Relief can help you learn what kinds of debts to avoid and limits that you can set to help you falling behind on monthly payments and running through your safety net too early. Contact us today to get started with your debt relief plan.

What Kinds of Debt Qualify For Debt Settlement?

Qualifying for Debt Settlement Services

This particular debt solution allows you to work with a debt relief company to negotiate a lower amount owed to your lender. Because the new amount owed is significantly lowered, most people can pay off the debt completely in two to three years. While debt settlement is ultimately a great option for many people, there are specific types of debt that are eligible.

Credit Cards

The most common type of debt for settlement services is that of credit cards. In fact, U.S. consumers have billions of dollars of credit card debt combined, and most households have an average of $8,000 in this type of debt. The eligible debt could be a couple thousand dollars of debt on a single credit card or even a compilation of debts on several cards and is not limited to traditional cards. Visa, Discover, or American Express are the norm for resolving debt, but you could also seek out settlement if you are in debt with a department store or other service credit cards, like ones from Sears, Macy’s, or even PayPal.

If the majority of your debt comes from this particular line of credit, then debt settlement actually works in your favor. In most cases, lending companies simply want to get their money back, so if you owe several thousand dollars to an unsecured credit account, they will likely want you to pay what you can as soon as possible. They simply do not want to wait months or years for the original amount to be returned, and this is great leverage for your negotiations.

Unsecured Loans

Loans are relatively simple to get, but they can be difficult to pay off, especially if you come across an unexpected hardship. The form of credit is notorious for high interest rates and numerous fees, so, if you get behind on a few payments or do not pay your balance in full every month, you could face a high financial penalty.

If a difficult situation comes up, the last thing you need to worry about is how to settle your debt when you are looking to pay thousands of extra dollars in fees and interest. Debt settlement services will work with you to lower the amount you owe and the fees associated with various types of loans. Personal loans and bank loans are the most common forms because they are often unsecured, meaning you did not have to provide any form of collateral to receive them. Secured loans, which are often in the form of business, auto, and some student loans, are more difficult to negotiate because your initial contract stated the lender could use your collateral to pay off any unpaid balance.

Medical Bills

One trip to the hospital leaves many people wondering how they can possibly owe so much money and what they can do to settle their medical debts. Debt settlement services may be the answer. While medical bills do not necessarily rack up a lot of interest in the amount of time you are not able to pay them off, it is very common for bills to be several thousand, or even tens of thousands, of dollars for simple services.

Despite the high cost of medical procedures and services, many hospitals and clinics will actually lower the amount owed pretty easily when a company seeks negotiation. Sometimes, the amount you owe can be as low as 50 percent of the original bill. When you work with a financial expert specializing in debt settlement, they will work with you to find out just how much you can afford and negotiate with the hospital to get as close to that amount as possible.

Other Stipulations

Worrying about how you can instantly settle so many debts is a stressful burden. Choosing to settle those debts with a trust company will not only relieve much of that stress but can also help you clear your debts in a simple, streamlined way and help you get back on track with your personal finances. If you think that settlement might be the right answer for you, consider if your specific situation is best suited for the debt settlement process.

Typically, debt settlement services are best for those who are in an overwhelming amount of debt, usually more than $10,000. You also have to make sure that you would be able to consistently pay off your new, settled amount. Most negotiations agree to a lower monthly payment so you pay off the lower balance in under five years. While the negotiations are important, failure to pay the negotiated amount could result in owing the original amount with additional fees.

Get the Solution that is Right for You

Credit cards, unsecured loan,s and medical bills are the main types of debt that qualify for settlement, but they are not part of a limited list. The best way to find out if your particular debt qualifies for debt settlement is to speak with someone from a debt relief company who will go over the types of debt you have, the amount you owe, your income, and your budget to come with a solution that is right for you. Debt settlement is just one of many services available to get you out of debt in the most manageable way possible. Speak with Liberty Debt Relief today to find out how you can take your first step out of debt and into a brighter future.

What is Unsecured Debt?

Debt is an undeniable part of adulthood. No matter how much money you make and what career path you are in, nobody can hide from it forever. It can come into your life through student loans, creep up with one too many credit cards, or you could just be down on your luck as a whole financially, but the good thing about debt is that it does not have to last forever. Getting out of debt requires that you know and understand the various types of credit options, such as personal loans, business loans, and credit cards, and how they can be defined as one of two types of debt: secured and unsecured debt. If you have discovered that your current credit accounts are defined as the latter, Liberty Debt Relief can help you answer the questions regarding unsecured debt so you can start moving forward financially.

Understanding the Unsecured Basics

So, what is unsecured debt? Simply enough, it is a type of debt that did not require any kind of collateral to obtain in the first place. Collateral can be your car, boat, home, 401(k), stocks, cash, or even your business. If you fail to pay back the debt as agreed, the credit company can seize or freeze your assets through a court order. When that happens, you can either pay back the credit lender in full or work out some kind of deal with the company, but if you fail to respond or inquire about your accounts being frozen or titles being transferred, they will likely liquidate your assets and use that to pay off your debt. Choosing to go with credit accounts that include unsecured debt, such as credit cards, private student loans, utility bills, and medical bills, ensures that this kind of situation never occurs.

While you don’t have to worry about losing your belongings if your payments fall behind for unsecured accounts, getting such a deal does not come without a price. Most credit options that fall within this category have significantly higher interest rates than those that qualify as secured debts. High interest rates mean more money spent over time and it can double or triple your initial loan amount if you are not careful. This is the lenders’ way of ensuring people make their payments in full (and as soon as possible) and keep people as serious about unsecured debts as they would be about losing their high-value items held as collateral for secured debts. If you still fail to pay back your debt, the lender can sue you and a court ruling can garnish your wages and cause you to sell property to pay back the debt.

Using It to Your Advantage

High interest rates and the possibility of having your future wages taken away until you pay off a debt can definitely be intimidating, but unsecured debts are some of the easiest to manage. If you find that the monthly payments are too high, call your lender and see what they can do to help you. At the end of the day, they want to do what they can to make sure they receive their money. What is even better about unsecured debt is that if you have multiple accounts, you can easily budget and prioritize your debts based on the interest rates and other terms and conditions.

The key to financial success is not letting debt intimidate you, and understanding the ins and out of debt is a great first step. Talk to Liberty Debt Relief today to find out how a little budgeting and prioritizing can help you clear your unsecured debts.

Good Debt Vs. Bad Debt: What Each Does to Your Credit

The Value Getting Relief From Debt

Every day, millions of Americans grapple with financial woes. Households in this country owe more than $13 trillion in overall debt, per a 2017 study, and, as of March 2018, the average home that carries debt owes more than $130,000. The latest information from the U.S. Census Bureau states that the median household income is only $59,039. Put all these numbers together, and it is clear many Americans are living beyond their means, especially when it comes to their unsecured debt.

If you are trying to get a grip on your finances and receive relief from debt situations, you may be presented with some difficult questions. Should you consider a settlement? What kind of relief is possible? How bad does debt consolidation hurt your credit score?

Certainly, there are a lot of different strategies worth exploring. Before you do so, however, you need to understand a few key concepts. One is the difference between good debt and bad debt.

Good Debt (Yes, It Does Exist)

The term “good debt” may seem like an oxymoron, but it does make sense. In essence, a good debt is any financial obligation that can improve your life. A mortgage can be considered a good debt because it gives you a place to live and, with some luck and shrewd management, can appreciate in value.

Student loans fit the bill, as well. Although adults throughout the country are struggling to make these payments—Americans owe nearly $1.5 trillion in student loan debt—a good education can lead to many professional opportunities and a higher income. Additionally, if you take on a loan to start your own business, that qualifies as good debt, because, if all goes according to plan, it will pay for itself—and then some.

The Fact About Bad Debt

Bad debt, on the other hand, comes from any kind of item that becomes less valuable the second you buy it. Credit cards, for example, are a common cause of bad debt. The vast majority of credit card purchases are paid off with interest rates included. That means, over time, you will pay above and beyond the original price. Payday loans, car loans, and furniture loans fit into this category, too. All this makes getting relief from debt a complex process.

wallet full of credit cards on a table

Your Credit Score

As it turns out, good debt tends to affect your credit score in a different way than bad debt. Before getting to that distinction, though, let’s take a look at how important debt is to your credit score in general.

Whether you are getting your credit score from Equifax, Experian, or TransUnion—the United States’ three credit bureaus—debt will play a big factor. Overall, debt accounts for 30 percent of your credit score. It is understandable why that figure is so high: Debt level helps lenders understand how risky a consumer is compared to the rest of the population.

Revolving and Installment Debts

It would be nice if all relief from debt immediately affected your credit score positively, especially if it’s relief from bad debt. Truth is, when it comes to your credit score, the more important distinction to make is not one between good or bad debt but is instead the one between revolving debt and installment debts. Credit bureaus like to see a mix of the two, but they are different in many ways.

Revolving Debt: This is easy to obtain, and it is easy to misuse. It is composed of open-ended accounts and usually has variable interest rates and predetermined credit limits. Credit cards and credit lines are common types of revolving debt.

When you are dealing with a revolving debt, you do not have to pay a certain amount each month. Specific loan terms are not required, either, and you can borrow money as you feel the need, provided you do not reach your credit limit. Typically, these loans do not have an end date; if you make the minimum payments each month, along with the necessary fees, it can remain open.

Installment Debt: Conversely, installment debts are paid in fixed amounts over a rigid period of time. Ordinarily, these obligations come with a fixed interest rate, too, so when the loan is agreed upon, the borrower will know exactly how much he or she will have to pay, and exactly when the loan will end.

Usually, but not always, good debts come in the form of installment credit, as mortgages, student loans, and private personal loans tend to fall into this category. Given how expensive these obligations can be, borrowers want to pay fixed interest rates on them. It is not advisable to take out a mortgage or a five-figure university loan if the interest rate can increase over time.

Debt and Credit Score

Being responsible with an installment loan is a great way to improve your credit. While your score may dip right after the loan begins, that should quickly change as long as you send in the compulsory payments when they are due. Indeed, people who make all of their payments over a years-long span show they are reliable borrowers, and, as a result, see their scores move in the right direction.

Unsurprisingly, revolving debts are the source of most efforts to gain relief from debt. That is because a big part of your credit score is determined by how much you owe compared to your available credit. This is known as the credit utilization ratio. If you are using more than 30 percent of your available credit, you should expect to be penalized in the form of a lowered score.

With installment debts, credit utilization ratio is not a big concern, as you know all of the specifics involved. But when it comes to credit cards, you need to monitor how much available credit you are using. You should avoid going above the 30 percent threshold whenever possible.

Receive Debt Relief Today

In most instances, relief from debt can reduce your credit score. As Americans try to accomplish this, they often ask how bad does debt consolidation hurt your credit score, and while the answer varies from case to case, it is usually substantial.

stamping checkbook

There are better ways to deal with unsecured debt than consolidation. At Liberty Debt Relief, we can provide the answers you seek, and we can provide a clear path forward.

If you are ready to receive a free consultation and learn how we can offer effective relief from debt, reach out to us today.

Adding It Up: How Does My Debt Compare to Other Americans?

Why American Debt Relief Is Important

When dealing with debt, it can be easy to assume that you are the only person struggling. Millions of Americans today are struggling to make the required monthly payments. As the cost of living continues to increase, it is becoming more difficult to manage spending. Regardless of your financial situation, know that you are not alone in trying to relieve your debt. How, though, do you compare to other Americans when it comes to debt?

The Average Amount of American Debt

American Debt Breakdown infographic

In 2018, the average debt for Americans aged 35 to 54 was roughly $134,000, according to Time Magazine. Time also reported that the overall debt for Americans aged 55 to 64 is roughly $108,300, while the amount for those aged 65 to 74 is $66,000.

These numbers show that, while debt continues to decline with age, it is still a huge issue that many Americans are facing, even in retirement. The retirement age in the United States is 65 years old, which means that even some of these individuals struggle financially. This trend does not have to continue. It is possible to experience debt relief and work towards achieving financial freedom before you reach retirement.

Additionally, a 2018 article from the Consumer News and Business Channel (CNBC) showed that debts, including credit cards, personal loans, auto loans, and student loans, are costing the average American 10% of their monthly income. Interestingly, however, the report from which CNBC is pulling its information also states that credit card debt in America has decreased by $8.1 billion. What this seems to mean is that more Americans are cutting up their credit cards and starting to make more aggressive payments on them.

Debt Solutions

In order to tackle this national debt issue, it is important to explore the various options available. At Liberty Debt Relief, we can speak to you about a range of solutions to meet your unique financial needs and goals. Here is a list of the top American debt relief options available today:

  • Debt Consolidation: This is the process of combining all of your unsecured debt into one single loan payment. Unsecured debt has no specific asset or property, like a house or car, that acts as collateral. Because it can be hard to manage medical bills, car payments, and credit card debt all at the same time, this approach is great if you are struggling to keep track of multiple debt obligations every month. Consolidating your debt could also help you to get a lower interest rate on your debt. This means that, over time, you will end up paying less for your overall debt because you will have a lower interest rate. This approach can help your credit score if you are able to keep up with the monthly payments. However, if you are not able to keep up with your payments, your credit score will suffer.
  • Debt Settlement: Debt settlement is a common American debt relief option that involves working with your creditors and coming to a debt settlement amount that is lower than your outstanding loan balance. While these negotiations are taking place, you are not making payments on your debt and instead saving your monthly payments to ultimately make a lump sum payment. Just keep in mind, your creditors are not required to come to an agreement and forgive part of your debt. If, however, you work with Liberty Debt Relief, we work with your creditors on your behalf, and we can use our experiences of working relationships to add leverage to your requested terms.

people negotiating at a table

  • Budgeting: Budgeting is often overlooked as a debt relief strategy, but it can be a great option if you do not currently keep track of your finances. Having a comprehensive budget that lays out exactly what you make in income every month and details all of your relevant expenses and debt payments can be incredibly useful in helping you come up with a debt relief solution. For example, if you create a budget for yourself and realize that you are spending over $50 a month on coffee, then that is money that could be redirected towards paying off your debt. Scheduling a free consultation with a Liberty Debt Relief expert will help you to determine which approach to debt relief is best for you.
  • Bankruptcy: Bankruptcy is considered the last resort, though it can give you a fresh start financially. You will no longer have to deal with debt collectors or overwhelming amounts of debt. This approach will, however, essentially ruin your credit and could cost you your assets, such as your home or car. Over time, you will also be able to rebuild your credit score, but filing for bankruptcy will stay on your credit report for at least seven years, depending on the type of bankruptcy.

How to Get Help With Debt

In order to truly experience debt relief and ultimately become debt free, it is important to have a debt relief strategy that works for you and is a true reflection of your financial goals. Liberty Debt Relief has a wide variety of American debt relief options and strategies to help you create the best approach to manage your debt. You do not have to tackle your debt alone. Millions of Americans today work with debt relief organizations in order to experience relief. Having a free consultation with one of our debt relief experts will give you the opportunity to ask important questions about your debt and learn what options you qualify for with your current debt.

Call Liberty Debt Relief today to schedule your free consultation and learn more about managing your debt!

What is an Example of Bad Debt?

Bad Debt in America

Millions of people today struggle with all different types of debt. According to a Federal Reserve Report on the Economic Well-Being of U.S. Households, published in May 2017, 79% of Americans have at least one credit card. This means that millions of Americans are faced with credit card debt and have to manage their finances accordingly. Debt can be very stressful and overwhelming, especially as your balance continues to grow.

As you think about your financial well being, it can be very confusing when you constantly hear terms such as good debt and bad debt. You may even be wondering what these terms mean and how debt can be bad or good.

What is Bad Debt?

This type of debt is incurred from purchasing assets that depreciate or go down in value as soon as you buy it, such as clothing and consumable goods. If you are unable to make money or generate income for a purchase, it may not be worth going into debt over. Purchasing a new car is another form of this kind of debt because, as soon as you purchase a new car and take it home, it has already gone down in value.

Another typical example is credit card debt. Credit cards are designed to make sure that you pay the maximum possible with high-interest rates. They can also have an extremely negative impact on your finances if not appropriately managed. If you keep a balance on a credit card, it will end up costing you significantly more than what any item or service you buy is worth. This is especially true if you only make the minimum payment every month. Credit cards are seen as one of the worst examples, but there are others.

What is Good Debt?

Good debt is seen as “good” because, ultimately, it is used to help you generate income or increase your net worth. Short term investing and real estate investment loans are just two examples. The most well-known example today, however, is student loan debt. As the costs associated with higher education continue to rise, it is becoming increasingly more difficult to pay for college.

Taking out student loans to fund your education can be good because the loan will eventually pay for itself once you finish school and can find a job. Individuals who have a college education consistently out-earn those who do not have a college degree, so this can be seen as an investment in your future.

Another example of good debt is taking out a small business loan to help grow your business. Creating your business is a great way to generate income and potentially increase your network as well, similar to small business loans are loans for short-term investments.

Managing Your Debt

To stay on top of your debt, it is important to actively manage your debt and work towards eventually becoming debt free. Having a mix of good and bad debt is normal, but it is important to limit or pay down the latter quickly to stay on track with your financial goals.

If you need help with your bad debt and regaining control of your finances, it may be worth it to meet with a certified debt specialist to come up with a comprehensive debt relief plan. Meet with ours at Liberty Debt Relief, and explore multiple debt relief options and ways to get back on track to financial freedom.