Household debt reached $ 12.7 trillion: that’s how you can handle credit

Information verified correct on May 19th, 2017

According to the Federal Reserve Bank of New York, Americans have more debts than ever before.

The debt of households reached $ 12.7 trillion, mainly in the form of mortgage loans, student loans, credit cards and car loans.

Many economists believe that this surge in debts is a sign of economic recovery. But for an individual borrower, debt can be a major burden.

If you own a share in this family debt of $ 12.7 trillion here are some tips on how to get out of the red zone.

Find the best student loan repayment plan

Student loans play a big role in our current public debt. In fact, student debt has increased from $ 500 billion in early 2007 to more than $ 1.3 trillion now.

As the debt on student loans increased, the default rates increased with it. The Federal Reserve of New York reported that 11 percent of loans for student loans were overdue for 90 days or more.

If you borrow money for college or graduate school, you know how burdensome student loans can be. But a default has many bad consequences that can hang over your head for the rest of your life. You need an attack plan for student loans.

Regardless of whether you are finished or not, take the time to write down the details of your repayment plan. If you can not fulfill your payments, study the income-based repayment plans, or refinance student loans.

Thanks to these options, you will not stay with your current conditions, interest rates or credit services forever. You can change your plan, make your payments more manageable and avoid default.

And if your payments are not too high, think about handing over early student loans. Throwing an extra payment on your loans here and there can help you overcome your debt faster.

First of all, pay off debts on credit cards with a high percentage

If you are struggling with a high balance on your credit cards, you must first solve this problem. Debt on credit cards is $ 764 billion of the total debt. The average interest rate on a credit card is about 13%.

If you renew the balance with such a high interest rate, think about whether it is worth paying for your credit cards first. You can transfer your balance to a new card in order to use 0% APR.

It can also be a reasonable step to take out a low percentage of personal loan to deal with your credit card debt. Regardless of what you choose, your goal is to reduce the money that you spend on interest.

If you are a new grad, first getting a credit card, try to pay it completely every month. There is a persistent myth that the transfer of balance helps build credit. But in fact, balancing just costs you more money.

So try not to spend more than every month. Having made timely payments and decreasing the debt, you will create a strong credit rating.

Balance mortgage payments with savings for retirement

Mortgage accounts for most of our debt in the amount of $ 12.7 trillion. In fact, Americans owe $ 8.6 trillion in housing loans, even more than in 2008.

But economists are not too concerned about the next world financial catastrophe. According to the New York Fed, lenders seem to have removed their practice when it comes to evaluating candidates.

The report shows that 61 percent of new mortgage loans are granted to borrowers with a high credit rating of 760 and above. In 2008, only 36 percent of new homeowners had a loan at this level.

Presumably, homeowners today are more able to handle their mortgage payments than they did 10 years ago. Some may even seek to pay off their mortgage early.

But with an average interest rate for a 30-year fixed mortgage of about 4%, it would be prudent to stick to a standard plan and place additional money elsewhere.

For example, it can pay off to invest additional income in a retirement savings account instead. Or you could put it on loans with higher interest rates.

By weighing various responsibilities, you can put your monthly income to where it will go next.

Avoid taking more debts than you can handle

While some economists welcome new debt statistics as a sign of economic growth, you still need to be careful in taking too much debt.

Before subscribing to the dotted line of any loan, study the details of your repayment plan and make sure that your payments fit into your monthly budget.

Loans can help you get a degree, establish a career or buy a big ticket, such as a house or car. But if you want to borrow, first draw a plan for managing your finances so you can control.

Phil Kirsten

As a writer for, Phil Kirsten specializes in personal finance, with her passion centring on helping people find better for whatever they're looking for.

Ask a Question

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the privacy policy.