Debt

Auto Debt

A car is no longer a luxury, it is a real necessity. In 1960 the average cost of a new car was $5,000. That has risen to $17,000 in 1990 and is now at $40,000 in 2020. With the average cost increasing this much, the typical car buyer has accepted that this major purchase will, more often, than not include outside financing.

Auto loans have been steadily increasing since 2011. In 2018, new auto loans totaled $585 Billion. This has led Americans to owe more than $1.16 Trillion in auto debt.

  • 2018 total new auto loans: $584 Billion dollars
  • 2018 new auto loans: 27 Million (loans)
  • Total auto loan debt in the U.S.: $1.16 Trillion
  • Auto loans account for almost 10% of all outstanding consumer debt
  • Average amount of new car loan: $32,187 (up 2.3% over prior year)
  • The average monthly car loan payment is $554 (new car), $391 (used car), and $457 (lease)
  • The average term is now 69 months
  • The average interest rate for the best credit scores is 8.35% and up to 21.10% for those with poor credit

Don’t you wish there was a better way? Many of The Money Coach’s clients have found that there is. Wouldn’t it be nice to avoid those high interest car loans? Wouldn’t it be nice to have some control over when and how you pay for your cars?

To find out how a private reserve account can help you replace finance companies and banks contact The Money Coach.

 

Credit Card Debt

Credit card debt also known as revolving credit has become a major financial problem for many Americans. Over 80% of Americans have 1 or more credit cards that they use to charge over $3 Trillion per year. Nearly half the U.S. population (46%) carries a credit card balance from month to month, with most of them maintaining the same level of debt from year to year. That means that quite simply, they are in a continuous rut and paying more in interest than they charged. The debt is still around long after the item purchased is no longer in use.

Even while the stock market was up and unemployment was down, credit card debt continued to rise. Young people are using credit cards to finance college educations. Although this is a national problem it appears to be of greater significance in Connecticut which has the second highest credit card debt per person in the U.S.

Average American household debt: $5,700
Average interest rate: 16.96%
Average monthly payment: $150
Time to pay off debt balance: 113 months (almost 10 years)
Total interest paid: $5600
Total cost of purchases: $11,300

Wouldn’t you like to know how long it will take to get out of debt, and how much that debt will cost?

Mortgage Debt

What is a mortgage? A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. People use mortgages to make large real estate purchases without paying the entire purchase price up front. Over many years, the borrower repays the loan, plus interest, until she or he owns the property free and clear. Mortgages come in many different sizes, shapes, and flavors.

Let’s Take the Mortgage Quiz

  1. A large down payment will save you more money over time than a small down payment.
  2. A 15-year mortgage will save you more money over time than a 30-year mortgage.
  3. Making extra principle payments saves you money.
  4. The interest rate is the main factor in determining the cost of a mortgage.
  5. You are more secure having your home paid off than financed 100%.

If you answered “True” to any, then we need to talk.

 

    Student Debt

    Nearly nine in 10 families expect their children to go to school, but only just over one-third — 36% — have a plan to pay for all four years of college, according to How America Pays for College 2017, a study by Sallie Mae and market research firm Ipsos.

    What happens when people don’t have a plan? Well maybe you’ve heard the old adage, “If you fail to plan, you plan to fail”. And nothing spells failure like excessive student debt. While most parents genuinely want to help their children get a college education, most are unprepared to make it happen, and that is the reason that student debt has surpassed credit card and automobile loan debt and is now second only to mortgage debt in the U.S.

    • Total US student debt is now at $1,670,000,000 (1.67 Trillion)
    • The cost of tuition plus room and board has more than doubled since 1971
    • The average cost of 1 year in college is equal to 34.8% of the median household income
    • 1 in 4 Americans have student debt (44.7 million people)
    • The average amount of student loan debt per person is $37,172
    • Paying off student debt is a common challenge for 26% of people under 60 years of age
    • Student loan payments have increased more than 2-1/2 times faster than inflation
    • The “standard” repayment timetable is 10 years, yet it actually takes 4-year degree holders an average of 19.7 years to payoff
    • The average student loan payment is $393 per month
    • 41% of student loan borrowers are unable to afford a $400 emergency
    • Student loans now have the highest rates of delinquency (11.5% are more than 90 days late)
    • Student loan debt is seldom discharged through bankruptcy

    Before making any plans to pay for college, there are two things parents must know:

    • How much it will cost?
    • What impact will that expense have on all other financial goals?
      1. Retirement
      2. Other children’s education
      3. Lifestyle