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Consumer debt among American families was recently

reported to total $12.73 trillion. To put this into

perspective, the US government debt is just shy of $20

trillion. The outrageous amount currently owned by

consumers is higher now than the peak reached in 2008

before the economic collapse. Although consumers are

handling this level of debt better today than they did in

2008, it still represents a tremendous risk to individuals

and our economy as a whole.

Interestingly enough, mortgage debt is now a smaller

percentage of total debt than it was back in 2008. Of

course, this is primarily due to tighter lending restrictions.

This means that Americans are holding more debt in

riskier loans such as credit cards, bank loans and car

loans for example. Much of this debt is subject to

fluctuating interest rates, which is now something we

need to consider as the Fed pushes short term rates

higher.

I believe that consumer debt is usually a habit. Unsecured

debt, such as credit cards, could be a sign of spending

more than the income flowing into the household. To

break this cycle, sometimes more extreme measures

must be deployed. If the goal is to get out of consumer

debt, it could be advantageous to use a mortgage or

home equity loan to help. With values rising to premarket

crash levels, most people have a decent amount

of equity in their homes. However, I strongly caution

against this without a plan to break the cycle that led to

the debt in the first place. Otherwise, the same situation

is likely to occur.