Personal Debt in the USA: Statistics and Solutions

Debt is a general term used to describe multiple financial vehicles. We would be remiss not to break it down to show which types of debt are most common among the consumers we polled in our most recent research project. Of course, most individuals have more than one source of debt, so keep that in mind when you review the following numbers:

Credit Card debt (69.9%): We honestly thought this number would be higher. Roughly seven out of ten consumers we surveyed have credit card debt. 

Mortgage (54.9%): More than half of the consumers polled own a home that is currently mortgaged. Only credit card debt ranks higher on this list. 

Student Loan (50.59%): There’s a debate currently raging on Capitol Hill about student loan forgiveness and free tuition. 50.59% of our participants carry these loans.

Auto loan (49%): Auto loans were expected to be high on the list. Roughly 49% of consumers polled finance a vehicle, adding to their existing debt load. 

HELOC (28.85%): The initials stand for “Home Equity Line of Credit.” This type of loan is typically taken out for home improvements or in emergency situations.

Business loan (28.45%): This number may be slightly higher due to the pandemic. A lot of unemployed Americans chose to start new businesses in 2020. 

Personal loan (28.24%): Personal loans come in all shapes and sizes, so this is another general term. The most common personal loans are unsecured installment loans.

Common Debt Types Among Respondents

Debt Types by Age

Debt doesn’t look the same for everyone. When young people first start in life, they build credit by acquiring debt. That usually comes in the form of credit cards. As they get older, their needs change. An auto loan might be needed to buy a car. Renting gets old and they buy a house. Everyone’s path is different. The most common types of debt by age group are:

• 18-29: Student Loans
• 30-39: Student Loans
• 40-49: Credit Cards debt 
• 50-59: Credit Cards debt
• 60-69: Mortgage
• 70 +: Credit card debts
  

This is a generalization, and it may not properly characterize modern-day America. Take student loans for example. This chart suggests that only individuals under forty years old are going to school on student loans, yet public colleges alone have over 400,000 older students currently enrolled. Many of them take out student loans to further their education.

The same principle applies to auto loans. The distribution of that type of debt is spread across the board. Some consumers buy cars on a regular cycle, every four to six years, so the financing starts over each time. That’s one of the reasons we left auto loans off this list. They are a common type of debt, but not specific to any particular age group.

Credit card debt seems to be constant. Student loan debt usually exceeds it in the early years. By the time consumers reach “middle age,” credit cards become the primary instrument for transactions. Ages forty to sixty are also when major life events start to happen, such as divorce, children in college, and medical issues. Debt tends to pile up quickly.

American Debt Types by Education Level

The relationship between debt and education level has a lot to do with income levels. There’s also the addition of student loans for those who choose to pursue undergrad, graduate, or post-graduate studies. We included these categories in our poll to get some data on students with varying education levels and how they accumulate debt.

Participants with a middle school or high school education level made up just under 10% of the total number of consumers polled. Our queries determined that most people in this bracket have accumulated up to $40K in debt. That debt comes in the form of credit cards, auto loans, and mortgages. Obviously, there’s no student loan debt in this scenario.

Keep in mind that a high school level education doesn’t necessarily mean that the individual did not go to college. The high school bracket also includes folks with some college education, but no degree. Some of them are students who completed a certificate program (no degree), so income levels in this category could still be significant. 

We broke college students with degrees down into three categories. 27.27% of respondents had university degrees (undergrad). Of those, 25% of them are in debt for more than $100K. A good portion of that is student loan debt. According to Collegedata, the average cost for college in 2020 is $38,070 a year for private colleges and $27,560 a year at public universities.  

The second category we looked at was postgraduate education. More than half (54.15%) of the participants in our poll have post-graduate degrees. The total accumulated debt in this group varied widely, so we were unable to get any concrete data. Ironically, we got the same results for vocational-technical college graduates, who made up 8.3% of respondents. 

The United States is a diverse country with different economic opportunities specific to each region. Some states have higher unemployment rates and fewer jobs. Others thrive with technology innovations and growing industries. Taking this into account, we included a state-by-state breakdown of consumer debt in our most recent poll. 

Once again, the results were surprising. In New York, which has a per capita income of $67,844, 22% of the consumers we polled reported no debt. Ohio has a smaller per capita income of $56,111 (34th in the US). They came in at 27.77% with no household debt. This seems to be in alignment with our data about the relationship between income and debt.

Taking it one step further, Virginia, which is 11th in the country for per capita income at $72,577, reported just 9% of households with no debt. Virginia also has a lower unemployment rate (currently 4.5%) than the national average, had a 5.1% increase in home sales during 2021, and has a median home price of $345,592, up 8.3% from 2020. 

One of the anomalies we found in this poll was the state of Texas. Just 8.3% of households polled in Texas reported no debt. Their per capita income of $60,629 is ranked 25th in the US, ten spots behind New York and nine ahead of Ohio. They were also one of the most impacted by 2020-2021 shutdowns, with nearly 300,000 people employed by oil and gas companies.

Common Debt Types by State

Having examined the relationship between income and debt, we delved a little deeper to analyze states with high debt and where that debt is coming from. New York came in at or near the top in all categories, including personal debt, credit card debt, mortgages, student loans, auto loans, and HELOCs. That was not an unexpected revelation.

Respondents in California, a state which ranks 7th in the country with a per capita income of $75,277, reported averages of 23.40% mortgage debt. Only Georgia (31.82%) came in higher. Massachusetts was a close third with 23.33% mortgage debt. Michigan (21.05%) and Ohio (19.60%) rounded out the top five in this category.

Ironically, of all the cities in the top five mortgage debt states we’ve listed, only Cleveland, Ohio shows up on a “best real estate markets” list. Average home sale prices in Cleveland are roughly $180,000 and home values have increased 5% from pre-pandemic levels. That, along with interest rates staying low, could potentially lead to an increase in mortgage debt this year.  

Of all the types of debt surveyed, credit card debt represented the highest percentage. It’s over 25% of overall household debt in Illinois (30.76%), Pennsylvania (30%), Georgia (27.28%), and Michigan (26.32%). In Florida, New York, and Pennsylvania, credit card debt represents the highest percentage of overall household debt. 

As for auto loans, Ohio (21.58%) and Michigan (21.05%) lead the pack by a significant margin. California is a distant third at 17.03%. Michigan and Ohio are the top two auto manufacturers in the United States. California has over 15 million registered automobiles.  

Massachusetts (20%), New Jersey (20.5%), Ohio (17.64%), Florida (16.39%), and Virginia (15.09%) all rank high in student loan debt. Texas (12.12%) and California (10.63%), the two states with the highest number of colleges and universities, are both at the bottom of the scale. Only Georgia (9.09%) ranks lower in student loan debt.   

Other types of debt we polled included business loans, home equity (HELOCs), and personal loans. Of these, the numbers that stood out were the percentage of business loans in Texas (15.15%) and Virginia (15.09%). The Texas number is expected, with cutbacks in oil and gas production forcing workers to seek new business opportunities. 

Virginia is similar since 66.67% of its GDP comes from the service sector. Hotels, motels, inns, and tourist attractions were all shut down during the pandemic. Meanwhile, an advanced technological infrastructure provided many unemployed workers the ability to start online businesses. This may have contributed to an increase in business loans. 

For a complete breakdown of states with high debt and the categories that debt falls in, review the table below. In the next section, we’ll look at total debt increases by state.

Household Debt Increase by State in 2020-2021

With 57 million documented US cases of COVID-19 since 2020 and over 828,000 deaths, the impact of the pandemic on Americans was profound and lasting. The death number took its toll physically and emotionally, but the fallout went far beyond that. Economically, the country suffered through some of the darkest times in decades.

To complete our poll, we looked at the overall debt increase during the pandemic. Despite trying financial times and high unemployment numbers, only seven of the states we polled had participants with a debt increase of over 30%. New Jersey was the highest on that list with 13.33% of households polled showing up in the highest bracket. 

On the opposite end of the scale, 59.09% of households polled in Florida reported no debt increase. Illinois and Georgia tied for second place, both with 50% reporting no debt increase. New Jersey was third with 40%. Debt increases of 10% to 30% were mixed, with only Massachusetts standing out in the “Up 10%” category with 53.33% reporting in that range. 

To clarify, we’re talking about overall debt increase here. This could mean adding more credit card debt or taking out a mortgage. Debt can also increase when consumers buy a new car using an auto loan. We’ve already broken down these categories above – you’re welcome to review the earlier sections of this page if you need a refresher.

In April of 2020, the St. Louis Federal Reserve published an article on US household debt which showed an increase of $1.5 trillion in household debt between 2008 and the fourth quarter of 2019. According to the Fed, as of December 2019, total consumer debt was $14.15 trillion. Their study also showed that 70% of the total was mortgage debt.

According to newyorkfed.org, that debt increased from another $15 trillion in 2021. Analysis of the data shows that this was mainly due to an increase in mortgage debt, while credit card debt actually declined. The new mortgage debt can be attributed to lower interest rates, a direct response to the economic uncertainty of the pandemic.

Prior to the pandemic, the numbers show that most Americans were dealing with debt by paying it down. According to Northwestern Mutual surveys over a three-year period, the average consumer debt went from $38,000 per person in 2018 down to $26,621 in early 2020, at the beginning of the pandemic. That was before shutdowns and high unemployment.

With historically low interest rates during the pandemic, the number of major purchases, particularly homes, increased. Credit card debt also went down during the pandemic, but that could be due to enhanced unemployment and stimulus payments, many of which were used to pay off large balances. There was also an increase in personal debt consolidation loans.

Before COVID, Americans Prioritized Paying Down Debt

One of the focal points of our recent poll was to look at how Americans were dealing with debt prior to COVID-19 and whether the pandemic changed that in any way. Fear and economic uncertainty can have a profound effect on consumer behavior. Our intent was to uncover any patterns that may have developed during this unprecedented time. 

Before COVID, 58.29% of Americans took a personal loan to cope with their debt. This is a general statement since personal loans come in more than one category. 45.71% of respondents took a debt consolidation loan, while 34.57% chose debt settlement options, which were plentiful from credit card companies even prior to the pandemic.

There were also a number of respondents (32.57%) who opted to hold off making monthly payments, choosing instead to prioritize living expenses or savings. Many of these would later go on to accept settlement offers on unpaid debt. Doing this during the pandemic turned out to be advantageous since interest rates for personal loans were low.

With the decrease in higher interest credit card debt, many Americans now have more bandwidth to either borrow more or pay off additional existing debt. The former was more common in 2020. Consumer borrowing increased, creating more debt. In the upcoming sections, we’ll go over how Americans are dealing with that scenario. 

Let’s talk about interest rates for a moment. High-interest debt from credit cards takes longer to pay off than debt from personal loans with lower interest rates. Savvy consumers looking to get out from under the high-interest burden of credit card debt will often take out a personal loan to pay it off. It’s essentially trading one interest rate for another.

There are a number of personal loans uses that Americans can take advantage of, but the primary motives are debt consolidation or debt settlement. Consolidation is what we described above. Total debt is added up and the personal loan is for that amount. Ideally, the interest rate on the loan is lower than the average interest rate of the outstanding debt.

A debt settlement loan is something different. One common example of this is an overdue credit card balance that the holder can no longer make minimum monthly payments on. By contacting their credit card company, they may be able to come to an agreement to “settle” the balance for less than what is actually owed. That’s known as “debt settlement.”

There are two components to debt settlement. The first is agreeing on an amount. The second is coming up with the money to pay that amount. This is where a personal loan can come in handy. Our poll shows that roughly one-third of our respondents chose debt settlement as a way to deal with personal debt prior to the Covid-19 pandemic.  

 Personal Loan Uses Before the Pandemic

Based on our numbers from this poll, the most common of all possible personal loan uses prior to the pandemic was debt consolidation. Nearly half of all respondents listed this as their top method for dealing with debt. That number is coupled with the intent of nearly 60% of respondents replying that they would take out a personal loan to deal with debt.

Of course, it’s possible to use savings for debt consolidation, but that’s extremely rare. Most individuals take out a loan to pay a lump sum like that. The same appears to have been the case with debt settlement, as just over one-third of respondents reported that they had gone that route. Post-pandemic, just 11.71% of respondents replied to that question.

Other personal loan uses include home improvement, medical bills, vehicle financing, and auto repairs. There’s also the “unexpected emergency” use, but we can’t really quantify or analyze that because the factors behind each case are random. In the next section, we’ll take a look at how each of these personal loan uses was applied during the pandemic.

Personal Loan Uses During the Pandemic

Forbes Magazine published a study in April 2021 that listed the five most common personal loan uses during the pandemic. For your convenience, we’ve listed those results here, along with a summary of why they appeared on this list. This is an enhancement to the data we accumulated with our recent poll on consumer debt in America.

Home Improvement (25%): Sitting at home with no job to go to and lots of extra time on your hands may be a good time to do a project around the house. It’s not a surprise that one in four respondents reported taking out a personal loan for home improvement.
Medical Bills (21%): Getting sick is a common occurrence in life, but last year was a time when medical bills spiraled due to COVID-19 or the inability to get preventative care in overcrowded hospitals. We actually expected this number to be higher.
Debt Consolidation (20%): We’ve covered this in length. Interest rates on personal loans were historically low and credit card interest rates remained where they always are, as high as 35% in some cases. This was another number we expected to be higher.
Vehicle Financing (20%): Using a personal loan to buy a car eliminates the fear of repossession since most personal loans are unsecured. It also takes consumers off the hook for a down payment. The personal loan can cover the full asking price.

Auto Repairs (20%): This goes back to interest rates again. Auto repairs, which are often paid for by credit card, posed less of a burden on consumers if they simply borrowed the money to pay for them. This seems to have been a trend during 2020. 

The percentages add up to more than 100% because some of the respondents to this study took out more than one personal loan. An example of this could be a debt consolidation loan followed by a vehicle financing loan. That scenario is not uncommon. 

According to our poll, only 33.43% claim that their personal debt did not increase during the Covid-19 pandemic. When economic conditions deteriorated mid-year and unemployment numbers went up, two-thirds of our respondents went into borrowing mode. This comes as no surprise since interest rates were at a historic low last year.

Those who did increase their debt fall into two categories. Americans who increased debt by 10% or less represent 24.57% of respondents polled. 42% of our group increased their debt by over 10%. That’s a significant number and it does not include PPP business loans. That’s an entirely separate category that we did not include in this study.

During Covid-19, a number of Americans took out a personal loan for the first time. Many of them had no debt prior to that. According to our numbers, 62% of Americans took out at least one loan, 31.14% took out 2-5 loans, and 6.86% took more than five loans during the pandemic. This number includes short-term and payday loans, which were popular during the pandemic. 

Low-interest rates certainly fueled the borrowing spree, but the need to have cash on hand during a national emergency was also a driving factor. There was a significant number of home improvement projects going on while workers were forced to stay at home. This certainly added to the number of loan applications at banks and lending institutions.

Of course, all of that borrowing means more Americans are deeper in debt as the pandemic winds down and the US industry starts to open up again. People are now back to work and finding ways to pay down the debt increases they added to their respective plates last year. 

In our next section, we’ll go over how they plan to do that.

Debt is not necessarily a bad thing, provided that you can afford the payments. In normal circumstances, this is done by making minimum monthly payments on credit cards and getting monthly loan payments out on time. When debt reaches a certain level, that becomes more difficult. Our poll asked the question of how Americans plan to deal with that.

The most popular option seems to be the personal loan route. 34.29% of respondents told us they would consider a personal loan as an option to pay off debt, with 24.87% listing it as their main option. This may prove to be a good move, since interest rates are still low and the borrowing criteria at lending institutions includes hardship clauses related to the pandemic.

One type of loan that seems to be high on everyone’s list is a debt consolidation loan. High interest credit card debt accumulated quickly for some people during the pandemic, so taking out a loan to consolidate that and lower interest rates is a strong move. 22.86% of Americans are open to this option, with 21.55% saying it will be their primary choice. 

Debt settlement is another choice for dealing with high interest credit card debt, and for some Americans it’s their only option. 11.71% of respondents listed this as possible, with 13.68% telling us it will be their main option this year. Americans in this position are encouraged to call their creditors and be proactive if they want to avoid derogatory marks on their credit report.

Holding off payments sometimes looks like a good way to force creditors to offer a settlement, but it’s risky and will decrease the debtor’s credit score. 9.43% of our respondents are considering this route, with 8.01% saying it will be their main option. In some cases, this is an economic choice – many Americans are still struggling just to cover their monthly bills.

Financial stress is real and was affecting young Americans long before the pandemic started. In 2019, 20% of young Americans reported feeling daily financial stress, while 66% suffer from it several times a year. This can be due to maintaining a certain lifestyle, feeling the crunch of student loan debt, or just plain living in a society that demands more from their generation.

How Often Do Americans Experience Financial Stress?

According to a survey conducted each year by the American Psychological Association (APA), money, work, and the economy are the three leading causes of financial stress in America. 2020 and 2021 had their fair share of all three. Money was scarce. Unemployment was high. Workers were either classified as “essential” and forced to work or sent home to live on unemployment checks.

Stimulus money and enhanced unemployment checks did alleviate some of the financial pressure, but uncertainty over the state of the economy left many Americans with a feeling of dread about the future. This may have been one of the factors fueling the lending market. Most people react to economic uncertainty by building their current capital resources.

The APA report found that money stress causes seven in ten Americans to suffer from physical and mental symptoms that include irritability, fatigue, anger, despair, depression, overeating, and sleeplessness. Some of the more serious side effects of these conditions include cardiovascular disease, adult-onset diabetes, and obesity. 

The struggle is real, and it’s not limited to low-income Americans. Financial stress affects up to 75% of Americans from all walks of life. According to our poll, 34% of the people in debt are experiencing financial stress once a month, while 23.14% experience it weekly. Only 17.43% of our surveyed respondents claim that they are not experiencing any financial stress.

How Do Americans Cope with Financial Stress?

Our poll included questions on how to deal with financial stress. The results were mixed, with roughly half (52.29%) responding that their outlet was sports or hobbies of some kind. This was encouraging, but many sports facilities and gyms were closed during the pandemic, leaving people with a need to motivate themselves to work out at home. 

As for hobbies, CNN published an interesting piece back in April 2020 that profiled some “long-lost” hobbies that were making a comeback during the pandemic. These included things like origami, crafts, and model trains. Golf, the “socially distanced” sport, also increased in popularity. According to recent data, millions of people worldwide tried it for the first time in 2020 and 2021. 

On a professional level, 43.71% of respondents reported that they are using professional financial counseling. This number is sure to increase this year with the higher debt numbers being reported, and that’s a positive thing. Seeking the advice of a professional in an area that is so critical to physical and mental health is highly recommended.

Some respondents chose the medical route. 36% are using medications and 28.86% are going to therapy to deal with money stress. It’s important to acknowledge that these are healthy choices, and no stigma should be attached to them. If you’re suffering from financial stress and need professional help, please seek it out without any reservations.  

For employees, your human resources department should be able to connect you with programs and professionals who can help you with financial stress. Employers often sponsor wellness programs that include reduced or free gym memberships, mental health counseling, and professional financial help. Ask your HR rep about these when you get a chance. 

The visual element above shows the results of a survey conducted by Intuit, the financial software company behind Mint.com, and other data aggregation solutions. Their results show that 31% of respondents said that tightening their budget was the best way to deal with financial stress, but 28% said they would simply ignore it.

Sadly, only 18% choose to talk about money stress with others, and under 10% have chosen to focus on work or hobbies (7%), improve their physical health (6%), or speak to a financial professional (5%). These numbers need to improve, and that only happens with the removal of cultural biases towards asking for help.

Our survey results were more encouraging. The focus on hobbies and sports was much higher, with over half of respondents saying this was an area of concentration for them. Medications, therapy, and professional financial counseling are still low, but they’re much higher than the Intuit survey. This may be due to the timing of the two polls. Ours was done in 2021.

The Covid-19 Pandemic of 2020 was a wake-up call for many and should be a constant reminder to all of us of what a sedentary lifestyle without human contact can lead to. Our poll shows a positive trend with individuals looking to improve themselves with physical activity and outside professional help. We’ll keep an eye on this to see if it continues. 

High-interest credit card debt is one of the most difficult to get out of. When balances grow and minimum monthly payments increase, the financial impact can be significant. This is a dilemma that many Americans are facing. Thankfully, there is a solution. It is known as debt consolidation, and it is one of the most common ways to eliminate credit card debt. 

Building a debt consolidation plan is a process that should be done in steps. The first action is to find the right company to handle it for you. Local banks and credit unions may offer consolidation loans, but they could be difficult to get if you have poor credit. There are a number of online lenders that will work with you if you’re in that situation. 

Before selecting a debt consolidation lender, check with the Better Business Bureau to make sure they are legitimate. Non-profit agencies aren’t necessarily better than for-profit companies, so don’t get taken in by that. You’ll also want to shop at a few different lenders to make sure you’re getting the best interest rates and terms available. 

The goal of debt consolidation is to take all of your high-interest debt and combine it into one loan payment. Make sure that the lending company you choose accomplishes this. Look for any additional fees that you might encounter during the life of the loan. The point is to get you out of debt, not deeper into it, so make sure you read the entire contract before agreeing to it.

Do Americans Trust Debt Consolidation Companies?

According to our Lendstart study, on a scale of 1-10, 54.29% of respondents say their trust factor for private debt consolidation companies is 7 or higher. Only 28.86% rated their trust as a 4 or less. That leaves roughly 19% somewhere in the middle. This is due to several factors, not the least of which is reputation management by the lenders. 

For instance, privacy is a big issue. One of the questions you should ask when hiring a debt consolidation company is how they store their data. Don’t wait until you’ve already filled out the online form because it will be too late after that to protect yourself. Call and ask about encryption and data storage to protect your personal information.

Another issue is lenders who take a “one-size-fits-all” approach. A nameless, faceless entity handling your financial affairs does not instill trust in the process. If you’re not speaking with a rep directly, chances are you’re in the wrong place. Consumers need personalized service to build trust.

Some consumers think they can simply borrow the money they need from family or friends, bypassing the need to trust “the system.” This might seem like a good option, but what happens if you default on the loan? Situations like that often ruin good friendships or strain family relations. Money issues are often safer when handled by a third party.  

The final reason for distrust is social media. If you search online, there are just as many articles telling you to trust debt consolidation as there are those that tell you not to. Social media feeds you content that is similar to what you already read, so focusing on distrust will give you more content on the same topic. Do independent searches to weigh the pros and cons.

Debt consolidation is a great solution, but those who hire debt consolidation companies often forget that they need to also change their spending habits and not accumulate any new debt after they take out the loan. This has also led to distrust in the process. Some consumers claim it “doesn’t work,” when it’s actually their own actions that caused the failure.

Our study revealed that the lenders people trust the most are Freedom and National. These were both selected by more than 30% of respondents as brands they would apply with for debt consolidation. This is in line with our own company research, as these are two brands that we do business with here at Lendstart. 

The qualifying criteria we use when selecting lenders involve more than just weighing interest rates and loan terms. We look for reliability and a history of ethical business practices. These are important to the consumer because several thousand dollars is going to change hands during the debt consolidation process. It’s critical that you use a lender you can trust. 

Other credible lenders we use that were also selected by participants in our survey are Century, Clear One, Lending Club, and Accredited. Each of these was chosen by at least 20% of respondents. Upstart and Upgrade came in at 19.71%. 

For a snapshot view, take a look at the table below, which contains our survey results on consumer trust in debt consolidation companies. For your convenience, we’ve included the company logo for each lender. Look for these brands when you’re shopping for a lender since they have already been vetted by our team. 

Here’s what our respondents had to say:

* Freedom DR – 36.29%
* Clear One – 24.57%
* Accreditet – 20.00%
* Debtmerica – 16.86%
* Curadebt – 15.43%
* Not familiar with any of the brands – 14.86%
* Do not trust any of the brands – 8.57%

Disclaimer:
The content is provided “as is”. The content is not, nor shall it be taken as professional or financial services or advice. We are not a financial institute, insurance broker, or agent.  Your use and reliance on any of the information provided therein should be done solely at your own risk. We highly recommend contact and advise a financial advisor prior to making any financial decision. We will not be responsible for any damages which may occur as a result of your use of the content available therein. we make no warranty that any information available is true, reliable, or accurate.