In a report released last week, Equifax revealed that consumer indebtedness increased year over year by 3.9% to $500.8 billion. Now that we have fewer home refinance options, balances are increasing for bank installment loans, lines of credit and auto loans. Although modest increases are to be expected, a 3.9% increase is almost double our economic growth rate.
Mortgage debt, which is normally considered the only good debt has been on the Department of Finance’s radar for the past few years, and through their intervention home owners have been forced to satisfy their financing needs elsewhere. While the government’s efforts may have prevented some consumers from taking on additional debt, the more likely scenario is that they’ve used non-mortgage consumer debt instead.
Non-mortgage debt comes with much higher interest rates and minimum monthly payments. Rising levels puts a greater strain on personal finances and can lower a family’s quality of life.
If you haven’t already got the message, now’s the time to tighten your belt buckle and reduce your spending. The goal is to eliminate your non-mortgage debt and build your savings. The alternative is to spend your hard earned income on high interest rates and boost bank profits. Better to keep your hard earned money working for you than anyone else.