How much debt is considered bad?
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
You might have too much debt if your debt-to-income ratio is more than 36%. Signs of having problematic debt include rising balances despite making regular payments and being unable to build an emergency fund of at least $500.
Credello: Studies show that Millennials often have debt. The average amount is almost $30K. Some have more, while others have less, but it's a sobering number. There are actions you can take if you're a Millennial and you're carrying this much debt.
$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month. However, you don't have to accept decades of credit card debt.
The 28/36 rule states that no more than 28% of a household's gross income should be spent on housing and no more than 36% on housing plus other debt.
$20,000 is a lot of credit card debt and it sounds like you're having trouble making progress,” says Rossman.
What's considered too much debt is relative and varies by person based on the financial situation. There's no specific definition of “a lot of debt” — $10,000 might be a high amount of debt to one person, for example, but a very manageable debt for someone else.
A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
Research from financial services company Northwestern Mutual found that excluding mortgages, the average personal debt per individual sat at $21,800 in 2023, significantly lower than the $29,800 recorded in 2019.
It will take 41 months to pay off $30,000 with payments of $1,000 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
Is 10k credit card debt bad?
Having any credit card debt can be stressful, but $10,000 in credit card debt is a different level of stress. The average credit card interest rate is over 20%, so interest charges alone will take up a large chunk of your payments. On $10,000 in balances, you could end up paying over $2,000 per year in interest.
It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
The 28/36 rule dictates that you spend no more than 28 percent of your gross monthly income on housing costs and no more than 36 percent on all of your debt combined, including those housing costs.
Personal debt can be considered to be unmanageable when the level of required repayments cannot be met through normal income streams. This would usually occur over a sustained period of time, causing overall debt levels to increase to a level beyond which somebody is able to pay.
High-interest loans -- which could include payday loans or unsecured personal loans -- can be considered bad debt, as the high interest payments can be difficult for the borrower to pay back, often putting them in a worse financial situation.
Generation | Average total debt (2023) | Average total debt (2022) |
---|---|---|
Millenial (27-42) | $125,047 | $115,784 |
Gen X (43-57) | $157,556 | $154,658 |
Baby Boomer (58-77) | $94,880 | $96,087 |
Silent Generation (78+) | $38,600 | $39,345 |
- Make a Budget and Stick to It. You must know where your money goes each month, full stop. ...
- Cut Unnecessary Spending. Remember that budget I mentioned? ...
- Sell Your Extra Stuff. The pandemic was great for cleaning out my closet and home office. ...
- Make More Money. ...
- Be Happy With What You Have. ...
- Final Thoughts.
- Take advantage of a debt relief service.
- Consolidate your debt with a home equity loan.
- Take advantage of 0% balance transfer credit cards.
Here's a look at how much nonmortgage debt Americans have by age group, and the average non-mortgage per capita debt for each group: 18-29-year-olds: $69 billion total, $12,871 average. 30-39-year-olds: $1.17 trillion, $26,532 average.
Likewise, millennial consumers (ages 25 to 40) have an average of $27,251 in non-mortgage debt, presumably across credit cards, auto loans, personal loans and student loans.
How much debt is the average 23 year old in?
State | Gen Z (ages 18–26) | Millennial (ages 27–42) |
---|---|---|
California | $15,664 | $63,433 |
Colorado | $19,532 | $63,053 |
Connecticut | $14,901 | $45,912 |
Delaware | $16,642 | $47,654 |
Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued. It helps you free yourself from financial obligations at a time when your income is presumably stable and potentially even growing.
One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.
- Analyze your situation.
- Consider bankruptcy.
- Consider going to a credit counseling service.
- Prioritize the debt you need to pay.
- Talk to your credit card issuers.
- Pay off the debt with the higher interest first.
- Or – pay off smaller debts first.
You could be facing a debt problem if over 15 percent of your monthly gross income goes towards paying your non-mortgage debts. Relying on credit to pay for everyday expenses, consistently only making minimum payments, not having savings and increasing balances are all warning signs of having too much debt.
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