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Mortgages Most Common Liability Among American Debt

debtsAs Americans grow more accustomed to using credit to make purchases, debt levels continue to rise in the U.S.

A recent report titled "The Complex story of American Debt" from the PEW Charitable Trusts found that housing debt is the largest liability for most households, with other debt remaining higher than 1990's levels.

"This report explores a key element of wealth: household debt," the report said. "Debt is sometimes acquired for mobility enhancing purposes, such as to pay for college or purchase a home. But debt can also serve as a stopgap for families to cover regular expenses or deal with financial emergencies, especially if their savings are not sufficient. The type and amount of debt that households carry contribute to their wealth and their overall financial health."

The report found that this rise in debt has not been followed by a rise in household income, therefore placing Americans deeper in debt. Low-income households were found to be implicated the most by debt. Their debt equaled to just one-fifth of their income in 2007, but that proportion increased to half by 2013. Middle-wealth households held over an average of $7,000 more debt in 2013 than in 2001 and previous years.

However, the report determined that debt, in the sustainable form, is both a blessing and a curse. Without this debt families would not be able to achieve homeownership, obtain college degrees, or start businesses.

According to PEW, 80 percent of Americans hold some form of debt, with mortgage occupying the largest portion of this debt at 44 percent. This debt can also include car loans, unpaid credit card balances, medical and legal bills, and student loans.

Gen-Xers are situated in their prime debt-acquiring years, with 89 percent holding some form of debt and 56 percent owing money on a mortgage, the report says. Of the baby boomers, 80 percent have some type of debt, while 47 percent are still paying on their homes, typically owing $90,000 on their homes.

The report also revealed that Americans appear to have mixed feelings about nonmortgage debt, with 69 percent indicating that it is a necessity but they prefer to live without it. Similarly, 68 percent said that loans and credit cards have afforded them many opportunities by allowing them to make purchases or investments that their income and savings alone could not support.

"The long-term effects of debt on today’s young Americans are still to be determined," the report said. "But these findings suggest that accruing some debt at an early age can increase long-term savings and wealth-building by fueling investments in homes and education, which in turn stabilize and support families and communities. Sustainable debt can be a positive force for the economic mobility and financial security of young Americans and their families."



Source: PEW Charitable Trusts

Click here to view the complete report from the PEW Charitable Trusts.


About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.

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