The biggest pitfalls, mistakes and how to get out of them

Consumer debt hit $14.56 trillion after the fourth quarter of 2020, according to the New York Federal Reserve.

TEMPLE, Texas — Debt remains a major problem in America, according to the New York Federal Reserve and debt.org, which showed consumer debt in 2020 sitting at nearly 14.5 percent.

Lourdes Zuniga, Executive Director of Financial health journey of Austin, said the biggest mistake people make is overspending and urges people to know what you have and spend less, even if it makes life a little uncomfortable for a while.

“I think people think I have a credit card and so I’m going to use it and so they manage it,” she said. “Try not to do that. The biggest mistake people make is spending too much and living beyond their means.”

Bill Fay, who writes for debt.org, wrote in a updated part 2021 for the debt site in four main areas:

  • Residence – Total mortgage debt rose to $10.4 trillion, an increase of $1 trillion from the same time in 2017. Fay called the increase in this type of debt overall good.
  • Automatique – Total auto debt in the fourth quarter of 2020 is $1.37 trillion, a jump of $100 billion from the same period in 2018.
  • Student loansThey continue to rise, hitting a record $1.56 trillion in the fourth quarter of 2020, up $100 billion from the same time in 2018. The average student debt in 2020 was $38,792.
  • Credit card – Credit card loans stood at $820 billion in the fourth quarter of 2020, reflecting a drop in consumer spending during the pandemic after this category of debt peaked at $930 billion a year earlier. The good news is that credit card debt actually fell in 2020, the first drop in a major category of consumer debt in seven years.

Zuniga, who has helped many low-income families find financial freedom, gave his biggest advice to anyone in difficulty, avoid predatory lenders at all costs, even if it means you have to buckle up for a longer road. difficult.

“Avoid going for payday loans, avoid predatory loans and some auto loans because these products are designed to never have an end of day,” she said. “Read the fine print and everything they do, you’ll be in this cycle forever.”

The Pew Charitable Trusts, a organization aimed at informing public by providing useful data that illuminates the issues and trends shaping our world, said most payday loans are unaffordable for most borrowers and tied to their pay cycle.

“The average personal loan requires a lump sum repayment of $430 the next payday, consuming 36% of an average borrower’s gross pay,” the organization said on its website. “However, research shows that most borrowers cannot afford more than 5 percent while covering basic expenses.”

According to PEW, the average payday loan borrower is in debt for five months of the year, spending on average $520 fee repeatedly borrow $375. The average fee at a storefront lending business is $55 per two weeks.

Texas does not have maximum loan amount specified that borrowers can take. There is also no fixed maximum financing fee with an APR that can exceed 400%.

Although Zuniga has already urged many people to stop payday loans, she also said people need to stop running away from their financial problems, ask for a free credit file every year and make a plan with who you owe money to.

“People are very forgiving and I don’t think we see that from collectors, but when you contact them and often show good faith, they’re often willing to negotiate with you as long as you’re willing to commit. to them and I will pay you,” she said.

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