Consumer Debt
In the simplest way, Consumer Debt is the debt outstanding of consumers. These do not include the debts of governments and businesses. In the terms of macroeconomics, this is a debt that is used to fulfill the consumption rather than for investment.
It includes the debts due to purchase of consumable goods whose value does not appreciate. This form of debt can come in various forms, for instance, credit card debt, student loan, home mortgages and other types of loans. As Consumer Debt is held by individuals and not by the government, it is hence also known as household debt.
Impact of Consumer Debt
Incurring a high level of this kind of a debt may not be beneficial for an individual as any kind of debt increases the burden on one’s income sources. This is because an individual is supposed to make regular payments against the debt incurred. If one fails to manage this debt, it can easily lead to bankruptcy.
On the other hand, incurring some amount of Consumer debt can prove to be useful in some cases. For instance, financing a laptop may be a good idea in case the buyer needs it to work from home for a higher paid job. In such cases, a debt has been incurred to buy something which will surely boost the buyer’s earning capacity.
