Debt, Consumer and Personal

Consumer and personal debt is debt undertaken by households and individuals. Properly used, such debt can be a valuable tool. For example, consumers can buy automobiles and homes without having to save all of the purchase price in advance. However, excessive and poorly managed consumer debt is a pervasive problem afflicting millions of Americans. The inability to live within one’s [Page 847]means has resulted in a substantial number of Americans running up their credit cards balances without having the ability to pay their bills.

There are two basic types of consumer debts—(1) revolving and (2) nonrevolving. The most common type of revolving credit is exemplified by credit cards, which requires periodic repayments to lenders. In this kind of debt, the borrower has a credit line, or ...