Realty411 Magazine Featuring Scott Meyers | Page 90
The Consumer Debt Anchor
With home mortgages, the
primary collateral for the loan
balance is the home itself. In the
event of a future default, the
lender can file a foreclosure
notice and take the property back
several months later. With
automobile loans, the car
dealership or current lender
servicing the loan can repossess
the car.
Homeowners often refinance
their nondeductible consumer
debt that generally have shorter
terms, much higher interest rates,
and no tax benefits most often
into newer cashout refinance
mortgage loans that reduce their
monthly debt obligations. While
this can be wise for many
property owners, it may be a bit
risky for other property owners if
they leverage their homes too
much.
With credit cards, lenders
don’t have any real collateral to
protect their financial interests,
which is why the interest rates
can easily be doubledigits about
10%, 20%, or 30% in annual
rates and fees, regardless of any
national usury laws that were
meant to protect borrowers from
being charged “unnecessarily and
unfairly high rates and fees” as
usury laws were originally
designed to do when first drafted.
Zero Hedge has reported that
50% of Americans don’t have
access to even $400 cash for an
emergency situation. Some
tenants pay upwards of 50% to
60% of their income on rent. A
past 2017 study by Northwestern
Mutual noted the following
details in regard to the lack of
cash and high credit card
balances for upwards of 50% of
young and older Americans
today:
* 50% of Baby Boomers have
basically no retirement savings.
* 50% of Americans (excluding
mortgage balances) have
outstanding debt balances
(credit cards, etc.) of more
than $25,000.
* The average American with
debt has credit card balances of
$37,000, and an annual income
of just $30,000.
* Over 45% of consumers spend
up to 50% of their monthly
income on debt repayments that
are typically near minimum
monthly payments.
Rising Global Debt
According to a report
released by IIF (Institute of
International Finance) Global
Debt Monitor, debt rose to a
whopping $246 trillion in the 1st
quarter of 2019. In just the first
three months of 2019, global
debt increased by a staggering
$3 trillion dollar amount. The
rate of global debt far outpaced
the rate of economic growth in
the same first quarter of 2019 as
the total debt/GDP (Gross
Domestic Product) ratio rose to
320%.
The same IIF Global Debt
Monitor report for Q1 2019
noted that the debt by sector as a
percentage of GDP as follows:
● Households: 59.8%
● Nonfinancial corporates: 91.4%
● Government: 87.2%
● Financial corporates: 80.8%
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