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Many people have been forced to file for bankruptcy when debts get out of control. In the last hundred years alone, the history of debt in America has changed dramatically, just as how to manage debt has changed.
Debt History in America
In the late 1920’s, the first bank loans for citizens in the working class were offered. These loans had an interest rate just under 13 percent. During this time period, lenders were more confident in offering loans to the working class since few people defaulted on the funding and the banks made a considerable amount of money off of the semi high interest applied to the principle balance of the loans. About a decade later, government loans were supplied to citizens that were middle class and, to boost the economy after the Great Depression, the government encouraged such loan offerings. A greater dependence on credit to support one’s lifestyle was the result of this type of loan encouragement.
Following the second World War, loans by the government were supplied to war veterans so that they could purchase homes. Later, in the 1970s the government began supplying people with home loans that were guaranteed. This wave of funding was supplied until the late 1980s and guaranteed loans were used to pay for as many as forty percent of all home loans in the United States. Right around this time the government also began supplying loans for higher education. More and more people began falling into the vicious cycle of borrowing and debt.
Credit cards where offered in the 1950s; originally these cards were used for restaurants and Diner’s Clubs, but in the late 1950s, American Express® began offering credit cards. By the mid 1970s Visa® credit cards were being offered, and more Americans were applying for such cards because they provided the convenience of being able to make purchases without immediate cash access. The wide acceptance of the credit card on a global scale made the use of credit cards even more appealing. More Americans began jumping on the debt bandwagon and within a few decades, debts began to get quickly out of control once people began living a lifestyle that was beyond their means. Today, due to the economic decline, the loss of jobs, the worst recession in decades, and mounting debt, millions of people are in debt and many more will be inevitably faced with filing bankruptcy.
You’re Not Alone: Famous People In Debt
You are not alone if you find yourself dealing with mounting debt; famous people from the past and the present have also dealt with serious debt issues. For example, Thomas Jefferson was so far in debt when he died that all of his belongings had to be put up at auction to pay off his remaining debts. Many people wound up in debtors prison when such laws were in existence too. Even one time wealthy people have mismanaged funds and have wound up filing for bankruptcy. People like the talk show host Larry King, the boxer Mike Tyson, the actor Burt Reynolds, and Kim Basinger the actress have had to file for bankruptcy protections in the past. In the last decade, over a million people have had to file for the protections that bankruptcy offers. At this time, it is estimated that consumer debt is equal to more than 1.7 trillion USD.
Understanding your Debt to Income Ratio
What’s easy to see about the history of debt in America is that while incomes have increased via the cost of living, and incomes in households have changed as women became a bigger part of the workforce, the forms of lending and borrowing have also changed. The “keep up with the Joneses” lifestyle has encouraged many people to borrow money or to avail themselves of credit cards before carefully considering the debt to income ratio that they have. In turn, irresponsible borrowing combined with equally irresponsible lending has led more people into serious debt and financial straits.
You can use a debt to income ratio calculator to successfully determine a percentage that reflects how much debt you presently have compared to your monthly gross income. If you want to know how to calculate debt to income ratio, here’s how; all of your recurring debts need to be added together and divided by your income. That figure must be turned into a percentage which will tell you if you are in good financial standing, if you face problems in the future, or if you need to seek immediately financial solutions for debt.
Where to Access a Debt to Income Ratio Calculator
Make your calculations as simple as possible by using an Internet based debt to income ratio calculator. These figures can help you determine if you have enough income to actually meet the financial obligations you have now and in the future; here are some online debt to ratio income calculators that you can access for free:
USNews.com
USNews.com has a simple debt to ratio calculator for you to use. The calculator allows you to insert information about your mortgage or rent, the monthly payment you are paying on your existing credit cards, your monthly car payments, your other obligations in terms of loans, your annual salary, and overtime or bonuses you might have, any alimony you are getting, and then it divides your debts by your income to deliver to you are percentage rate. Visit the site for more details at:
http://www.usnews.com/usnews/biztech/tools/modebtratio.htm.
Consumer Credit Counseling Services
On the Consumer Credit Counseling Services website you will find a calculator that will allow you to enter as many as twelve different debts. You can then determine your income, your total amount of debts, and your debt to income ratio. Guidance is given to you about percentages and what they might indicate as well. Visit the site for more information at:
http://www.cccsstl.org/debt_test/cccs_debt_to_income_calculator.asp.
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Brief History: Debt in America
