It is no secret that the cost of living at the moment is extremely high. All across the world many families are suffering from rising prices in all aspects of life.
Many people have turned to borrowing and loans whether short term loans such as payday loans (more information here) or longer term loans such as secured loans to help them cover their expenses.
This in turn has caused a huge increase in personal debt in the US and it is continuing to rise.
This guide takes you through some of the reasons why personal debt is on the rise in the US and why some families and individuals have decided to turn to borrowing money in order to help them get through these circumstances.
Inflation And Rising Cost of Living
Inflation is at its highest level in 40 years in the United States, the increase in the cost of living has been enormous.
Whether it is the cost of food, electricity, gas, water or fuel, there have been waves of increases across the board.
However, salary increases have not yet caught up with the high inflation rates which means many people are starting to become out of pocket because of inflation and rising costs of living.
Therefore, many people have looked to borrow in all shapes and sizes in order to cover their current financial problems. This has caused an increase in personal debt in the US.
Increased Short Term Borrowing
The increase in cost of living has also caused many people in the US to turn to short term borrowing.
Whether that be in the form of a payday loan or another short term loan option, many in the US have begun to go into debt in order to pay their essential bills.
Personal debt is on the rise as many people use short term loans to help plug the gaps especially if they have incurred an unexpected cost during the month such as car repairs or a medical bill.
Rising Property Prices
Another reason why personal debt is on the rise in the US is because of surging property prices.
Property prices in the US, much like those in the UK and around the world (source: ProperEaze) are reaching all-time highs and many people are struggling to afford houses especially as first-time buyers.
With the overall cost of properties rising, people are borrowing more and more, especially in the form of mortgages, in order to be able to afford the house they want to buy.
There has been a $250 billion increase in mortgage debt over the last and this has been caused by the rising cost of housing.
Rising Student Debt
Lastly, personal debt is on the rise in the US also because of rising student debt. Although the price of college in the US is rising, many people are still attending.
With fewer parents able to pay for their children’s tuition because of financial problems elsewhere in their life, more and more students are taking out student loans.
Student loan debt climbed by $14 billion in the first quarter of 2022 and the rising student debt is a major factor in why personal debt is on the rise in the US.