Welcome To The Circus: Bread, Circuses, And Debt Traps (Part 3)
Debt traps to keep you poor.
5 Debt Traps To Avoid
There are many debt traps that society has laid out to trap young people. Business Insider states, “The average American has $52,940 worth of debt across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans.” Beware of debt traps! Here are five debt traps to be aware of.
Debt Traps
College
According to Student Loan Hero, “55% of bachelor’s degree recipients took out student loans, graduating with an average of $28,400 in federal and private debt. And 14% of parents with children in the class of 2019 — the latest data available — took out an average in federal parent PLUS loans.” College debt is one of the first types of debt that young people accept to pay because they think it is an investment in their future. The bottom line is that college is not worth going into debt for.
Car Loans
Finder says that “around 35% of American adults were relying on auto loans to pay for a car in 2019, according to a study by the Federal Reserve… By the end of 2019, they owed $19,231 on average — up 25% from 2009.” In total, American consumers owe $1.43 trillion in auto loans. Cars depreciate once you drive them off the lot. However, classic and rare cars can increase in value because they are collectibles.
Credit Card Debt
According to Experian, Americans' average credit card balance was $5,525 in 2021. The Federal Reserve found that Americans’ outstanding revolving debt was $998.4 billion in July 2021. Experian found that Generation X has the “largest average balance ($7,070 in 2021) among all the generations,” but “Millennials and the fast-growing Generation Z saw their average balances increase in 202.” More Americans continue to go into credit card debt which in 2022 “grew 5.5% from the first and second quarter and 13% year-over-year.” Credit cards are a debt trap, yet many people are addicted to them.
Medical Debt
According to Verywell Health, Americans owe $140 billion in medical debt for their healthcare. One of the more shocking findings by the National Bankruptcy Forum was that “more than 60% of insured Americans with medical bills blow through most or all of their savings.” According to CNBC, “A quarter of Americans owe $10,000 or more in medical debt, even though half of them have health insurance that’s supposed to minimize excessive health-care costs, a new study finds.” The medical system from the insurance companies, hospitals, and therapists is primarily there to put you on prescriptions and medications you most likely don’t need.
Mortgage
While this may go against how most people view a mortgage, a mortgage is a form of debt. You are paying a mortgage monthly to a bank so you can live in your house unless you paid for it outright with cash. Mortgage comes from the old French word morgage, “a conveyance of property on condition as security for a loan or agreement," which means “death pledge.” A mortgage is a loan. Usha Pradham writes, “It is a form of debt that is secured by the borrower's real estate property and usually is for the acquisition of the real estate property that the mortgage is being placed on.” Experian found that “the average mortgage balance in 2021 increased by 5.9% to $220,380, according to Experian data, the largest increase in at least 10 years.”
If you want to buy a house, pay upfront with as much cash as you can or buy it outright with cash to avoid this debt trap.
This is post three of a five-part series. Be sure to subscribe to get the next two parts sent directly to your inbox!