3 Thoughts About How Americans Are Re-Thinking Debt Dependency

[Aug 5, 2009.]

 

There's nothing wrong with taking out a loan. In fact, loans are an extremely important part of life. From the personal loan that helps you pay for a wedding to the mortgage that helps you buy that first house, loans can definitely be your friend.

Too many loans, especially too many high interest loans, however, can be your worst enemy. Americans, as a group, seem to be re-evaluating their use of credit in light of recent economic troubles.

This re-balancing is still in motion, but here are three thoughts about what's happened so far:

1. No Understanding, No Signing on the Dotted Line

Perhaps the number one greatest consequence of the subprime mortgage disaster (and related disasters) is that understanding a loan before taking out a loan is an absolute must. For years, the federal government has attempted to compel lenders to make loans easy to understand, through measures like the Truth-In-Lending Act. But nothing beats borrower commitment when it comes to understanding a loan.

2. The Modification Dream

Another prominent reality of the new debt environment is the dream of loan modification. Homeowners, for example, have applied by the hundreds of thousands for mortgage modifications. In terms of personal debt clean up, debt consolidation is a popular option.

Despite the necessity of modification in some cases, long-term dependence on changing the terms of a loan contract cannot be counted as a positive side effect of current debt difficulties.

3. Too Much Credit Card Debt Is Bad

According to recent statistics, 43 percent of Americans are relying more on their debit cards as a result of the recession. Meanwhile, banks are writing off credit card debt by the billions.

Clearly, too much credit card debt is a dangerous thing. It makes sense, then, that taking out a personal loan for debt consolidation has become an appealing option.

A Developing Story

The re-thinking of credit use by Americans is underway but not nearly finished. With the landscape still littered with foreclosures, bankruptcies, and other remnants of a past over-borrowing age, borrowers are wise to consider the affordability of every loan they take out.

This seriousness of purpose with regard to loans is a hopeful development that will hopefully keep developing.

 

About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.