Before you tackle debt through debt consolidation or any other strategy, it's a good idea to understand what you're working with.
Debt is an amount of borrowed money that's usually borrowed with the agreement that it will be paid back with interest. Debt is prevalent in America–and, often, it's an expected part of life. In late 2022, the average American had about $101,915 in debt.
Not all debt is the same, though, and each American's debt profile may be slightly different.
Sometimes debt isn't optional. People may go into debt to substantially improve their lives or even to protect themselves or their loved ones. If you're in debt, that doesn't mean you've made bad choices ore aren't good with money.
It just means that it's time to think strategically about options you can pursue to increase your financial health over time, which may involve reducing or, perhaps, consolidating your debt.
There are several different types of debt that you may be familiar with, including:
- Mortgages: money borrowed to buy property
- Student loans: loans taken to cover education expenses
- Credit card debt: money borrowed by using a credit card to make purchases
- Buy now, pay later systems: short-term financing that allows people to make purchases and pay for them at a later date
- Auto loans: loans taken to buy cars
- Personal loans: money borrowed for personal use, which can mean many things–from unexpected expenses to home renovations and beyond
- Medical debt: debt incurred because of uncovered medical expenses
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