Consumers and debt

The resources of the world are limited but human want is unlimited - Economics starts off with this phrase. The present age of consumerism has witnessed a gigantic rise in consumer debt. The common forms are credit card debts, payday loans and other types of consumer debts, which generally charge higher rates of interest than long term secured loans.

There are two schools with divergent theories on consumer debt. One says that it is not good to incur debt other than for investments. Another group opines that consumer debt fuels the growth of domestic economy.

The Merits Of Consumer Debt

The rise in consumer debts points to the rise in consumption and demand for consumable goods, which indicates growth of economy. Some financial advisors take a liberal attitude towards consumer debt and points the benefits of consumer credits leveraged to small businesses and real estates.

Buying items like automobiles through consumer debt are beneficial and are considered as good investment. Though the debt of an average consumer is on rise but simultaneously the value of their assets have increased. Today the banks or other lenders experience less defaulters so it can be said that the consumers are able to manage their debts quite efficiently.

The Dark Side Of Consumer Debt

Civilization through ages has condemned consumer debt and some have even considered personal debt immoral. Though the fiscal equation in the age of globalization has tilted towards the lure of consumerism but the massive amount of consumer debt incurred by today’s individuals beyond their means has translated into huge credit counseling and debt consolidation industry.

The massive market tempts you with lucrative array of goods. If you can stay within your budget while buying household goods it is okay. But usually people fall prey to the decoy of credit and start borrowing for day-to-day things. Your finance then moves out of your control and you need to borrow money for unforeseen emergencies or important things. But today credit is available for any thing on earth and people sink into debts to fulfill some momentary craze, like the impulse to change your furniture or to change the paint of your house.

The credit card industry has opened the door of magic land for the average customer. With the easy entry to the luxury world with enticing ‘offers’ people are buying things, which earlier they would have thought twice before buying. The consumers are always on a spending spree with easy plastic money.

With soaring percentage of consumer debt the saving ratio of the average household is sinking lower. The rising number of bankruptcies in the household sector points to the negative side of consumer debt. Non-payment of loans can lead to insolvency in the lending sector.

There are consumers who are worried about their financial condition but their percentage is awfully low. Unless and until the consumers start worrying to get their finances under control, the rising consumer debt can be injurious to the economy.

So it is important for you to draw up a budget and financial plan to manage your finance effectively. Borrow when you have to but don’t get swayed by the charm of easy plastic money and don’t get caught in the web of consumer debt.