10 Causes of Debt 5-10

Causes of Debt #5 Car loans: $768 billion

 

Outstanding auto loans totaled $768 billion in the third quarter of 2012, the highest amount in nearly four years, according to the Fed. Also, auto-loan balances increased for the sixth consecutive quarter.
New auto loans rose for the third consecutive quarter, to $85.8 billion, an increase of 4.4% over the prior quarter.
The percentage of auto-loan debt that is 90 days or more delinquent was roughly steady versus the prior quarter, at about 4.2%.
The rise in auto debt, along with the stability in auto-loan delinquencies, is seen as a positive sign for the health of the overall economy.

Cause of Debt #6 Credit card debt: $674 billion

 

Credit card debt in the United States totaled $674 billion in the third quarter, up $2 billion from the second quarter, but down significantly from its peak of $866 billion in the fourth quarter of 2008.

The Federal Reserve Bank of New York also reported that there are 382 million open credit card accounts, down slightly from the second quarter.

The average credit card debt per borrower was $4,996 in the third quarter, according to the credit reporting bureau TransUnion. That is up 0.5% from the second quarter of 2011 and up 4.9% from the third quarter.

Credit card debt in 2012 followed the same pattern as the previous year, TransUnion reports, with balances declining in the first half of 2012, then increasing in the second half. That seasonal trend is also reflected in the national credit card delinquency rate (the ratio of borrowers with payments 90 days or more past due), which increased from 0.63% in the second quarter to 0.75% in the third.

 

Cause of Debt #7 Home equity loans: $573 billion

 

During the height of the real-estate bubble, Americans relied on the equity in their homes to support their lifestyles in the face of falling or stagnant wages. The viability of that approach evaporated in the wake of the financial meltdown that occurred in late 2007, but home equity lines of credit have remained a significant source of personal debt for U.S. consumers.
On the plus side, that exposure has mainly declined since 2008.
Balances on home equity lines of credit dropped by $16 billion, or 2.7%, to $573 billion in the second quarter of 2012, the Fed reports. The delinquency rate (90 days or more) for such lines of credit has remained steady at 4.9%, as of Sept. 30, 2012, the Fed states.

Causes of Debt #8 Medical debt: Estimated to be hundreds of millions of dollars

 

Not all credit card debt involves discretionary purchases. Many Americans use their cards to pay for medical expenses not covered by health insurance. Reliable figures for what Americans collectively owe in health care debt are not available, but recent surveys suggest it's a big problem.
According to the Commonwealth Fund, a nonprofit health care research foundation, 24% of Americans ages 19 to 64 have medical debt they are paying off; 25% of them owed $4,000 or more.
A survey by the research and advocacy group Demos found that 62% of low- and middle-income households with credit card debt reported that medical expenses contributed to what they owed, adding an average of $1,679 to their balances. And 30% of the households surveyed had medical debt, averaging $6,476, that's not on their credit cards.
Amy Traub, a senior policy analyst at Demos, says about 62% of personal bankruptcies in the United States in 2007 were linked to medical bills or illness, and past-due medical bills make up 52% of accounts reported by collection agencies.

Cause of Debt #9 Gambling debt: Estimated to be hundreds of millions of dollars

 

One particularly toxic kind of debt that frequently ends up on credit card balances stems from the losses racked up by problem gamblers.
Here, too, hard data is lacking, but new casinos and the availability of online gambling sites appear to be giving people more ways to get in real financial trouble.
The National Council on Problem Gambling estimates that about 2 million Americans in any given year could be considered pathological gamblers, and an additional 4 million to 6 million could be considered problem gamblers.
Those with gambling problems can rack up serious debts. Gamblers seeking help from Nebraska's Department of Health and Human Services reported an average debt of $28,158, the department reported in 2011. If that level of debt were shared by half of the pathological or problem gamblers in country, it would amount to between $84.5 million and $112.7 million in total gambling debt.

Causes of Debt #10 Personal business and farm loans: Several hundred billion dollars

 

One form of debt that is generally considered positive is the kind taken on by people who are starting or expanding business.
So, it can be considered good news that the U.S. Small Business Administration's loan programs posted their second-largest dollar volume ever in the 2012 fiscal year, which ended on Sept. 30. The agency's loans for the year totaled $30.25 billion, which works out to about $97 per American, and the SBA says the growing pace of its loans is a positive sign for the economy.
Agriculture remains an important part of the economy, too, and farm loans (which, like small business loans, are typically made to individuals rather than corporations) represent another arguably positive form of personal debt.
As of year-end 2011, the U.S. banking industry had extended nearly $130 billion in farm loans, according to the American Bankers Association's latest Farm Bank Performance Report.  You have to understand that when you start a small business you have to budget yourself and make sure you have a serious plan on how you are going to profit in this business.  Information gathered from (MSN Money)


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