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Nonmortgage consumer debt reaches all-time high

Some residents of Salem, Massachusetts, may be finding themselves deeper in consumer debt these days. If so, they are following a national trend. According to a leading financial institution, consumer borrowing is at an all-time high.

Nonmortgage consumer debt is approaching $4 trillion nationwide, and it is possible that it will exceed the 4-trillion mark by the end of 2018. According to the institution, the largest portion of this figure is credit cards, auto loans and student loans. In terms of a debt-to-income ratio, the percentage of consumer debt to disposable income is higher than it was in the years preceding the mortgage collapse of the last decade.

There may be several reasons for the rise. First, interest rates are low for both credit cards and auto loans. Second, the cost of post-secondary education continues to rise, leading to an increase in the student loan debt. Finally, consumers may be feeling more comfortable in both their own finances and the economy.

On the good side, the default rate remains relatively low at present. On the other hand, the Federal Reserve is expected to raise interest rates later this year. For those with variable rate loans, an increase in payments on those loans can be expected.

Many people do not foresee financial trouble until it is too late. Increased borrowing may fit into the monthly budget at present, but an illness, a job loss or unexpected expenses can do a great deal of damage to a person's finances. If someone begins to default on payments, the cost of credit becomes more expensive. For individuals who are experiencing financial distress, meeting with a nonprofit credit agency or a bankruptcy attorney is a wise decision. In some cases, filing for bankruptcy can forgive some of a person's debt and provide him or her with much-needed financial relief.

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