Turbo Takeaways
- While consumer debt in the U.S. fluctuates, it increased to $18.39 trillion in Q2 of 2025.
- Mortgages account for 70% of all consumer debt in America.
- Consumer debt includes mortgages, auto loans, home equity lines of credit (HELOCs), credit cards, and student loans.
Consumer Debt in the U.S.
Debt is a reality for most individuals. From credit card balances to mortgage loans, consumer debt is essential to the U.S. economy, enabling consumers to purchase necessary goods and services.
While debt can help you purchase important assets, such as a home and car, it’s also crucial to understand how consumer debt works to manage your personal finances effectively.
What Is Consumer Debt?
Consumer debt is a type of debt that individuals owe due to purchasing goods for household consumption. Also known as household debt and consumer credit, it measures the total of all consumer debts within a household.
Consumer debt can fall into two categories: secured debt and unsecured debt.
A secured debt is a type of debt that’s backed by collateral that acts as security for the lender's investment. If the borrower fails to repay the debt, the lender can legally seize and sell the collateral to collect the outstanding debt.
Unsecured debt is not backed by collateral and is riskier for lenders. With this type of debt, it's harder for the lender to recoup funds if the borrower defaults on payments. Due to their risky nature, unsecured debts have higher interest rates.
Did You Know?
Lenders check several financial factors to assess your repayment capability before lending money, including credit scores, income, credit history, and your debt-to-income ratio.
Types of Consumer Debt
These are the most common types of consumer debts:
1. Credit Card Debt
Most consumers own and use a credit card in some capacity. Credit card debt is typically incurred when consumers make daily purchases and pay monthly bills. In Quarter 2 of 2025, Americans carried $1.21 trillion in credit card balances (PDF).
Credit cards are a form of revolving debt. This means that once you pay off the outstanding balance at the end of the month, the available balance replenishes.
Consumer debt from credit cards becomes hard to manage when you make only minimum payments on your monthly balance. If your debt-to-income ratio is so high that you can't pay off your accounts in full each month, you risk owing more in interest, making the cycle of debt difficult to break.
Interest on Credit Card Debt
Average credit card interest rates can exceed 20%, adding high fees to your balance if you don't pay in full each month.
2. Personal Loans
A personal loan is an unsecured debt that can be borrowed for any type of financial need, such as medical bills, car repairs, or debt consolidation. You can borrow a personal loan from a bank, credit union, or online lender.
Personal loans are installment debts that provide a lump sum amount, which is repaid in fixed monthly installments. These loans last between 12 and 84 months, with interest rates ranging from 6% to 36%.
3. Mortgage Debt
Mortgages are the largest source of consumer debt in America. In 2025, total mortgage debt in the U.S. reached $12.94 trillion (PDF).
Mortgage debt is a type of secured loan used to purchase property, with the property itself serving as collateral. These long-term debts typically have repayment terms from 15 to 30 years.
Because mortgages are secured by property, failing to repay the loan as agreed can result in foreclosure or a short sale. Prioritizing mortgage payments in your budget can help you avoid this penalty.
4. Auto Loans
Auto loans, sometimes referred to as vehicle loans, are secured debts used to purchase cars, trucks, boats, and other vehicles. While the borrower owns the vehicle, it also serves as collateral for the loan.
These are short-term installment loans, typically lasting between 12 and 84 months. Interest on auto loans normally ranges between 6% and 12%, with new cars generally costing less in interest.
5. Student Loans
Along with mortgages and auto loan balances, student loans make up a significant portion of debt in the U.S. Many students rely on federal student loans to cover tuition and other education-related expenses.
Student loans are unsecured debts with repayment terms that typically last ten years or more. There are also many repayment plans available for eligible borrowers, and interest on student loan payments is tax-deductible.
Bankruptcy and Student Loans
Student loans come with limitations when filing for bankruptcy. In most cases, bankruptcy doesn’t discharge student loans, meaning borrowers are still responsible for repayment.
Advantages of Consumer Debt
Here are a few advantages of consumer debt:
Adds Flexibility in Spending
The most significant advantage of consumer debt is easy access to money and flexibility to spend. Many people live paycheck-to-paycheck, and having an option like a credit card can help them pay for necessities without cash.
A credit card's revolving debt allows consumers to spend money and repay it when they receive their paycheck. If you clear your balance in full at the end of the billing cycle, you won’t have to pay interest.
Helps With Long-Term Financial Goals
Most people need more money than they can save for significant expenses like buying a house or paying college tuition. This is where consumer debt can help.
For example, if you want to buy a home that costs $400,000, it’s easier to save for a 20% down payment, as most consumers don't have the option to pay in full. Borrowing a mortgage for the remaining amount is much more manageable than saving for the entire cost.
Covers Emergencies
Consumer debts, such as personal loans, help you manage unforeseen and necessary expenses. If you don’t have an emergency fund and your car breaks down, a personal loan can help you pay for repairs so you don't go without a vehicle.
Improves Your Credit Score
On-time payment of your debt installments has a substantial positive impact on your credit score. A higher credit score makes it easier to qualify for loans and secure competitive interest rates.
Boosts Economy
Credit encourages consumer spending, strengthening the country's economy. People use debts to manage their short and long-term financial needs, while businesses earn money by lending funds to consumers.
Risks of Consumer Debt
However, consumer debt also has a few disadvantages, such as:
Overspending
Easy access to unsecured consumer loans and lines of credit may promote overspending. Some individuals may misjudge their financial situation and take on more debt than they can afford to repay. This can ultimately lead to a vicious cycle of debt, resulting in bad credit, high delinquency rates, debt in collections, predatory loans, and even bankruptcy.
High Fees
Some forms of consumer debt, such as credit cards and personal loans, have high interest rates, which can significantly impact your repayment ability. Long-term obligations such as mortgages and student loans offer low interest rates, but you’ll pay more over the life of the loan due to the longer repayment term.
Delinquency
Delinquency occurs when a borrower fails to make timely debt payments. A loan is typically considered delinquent when repayments are not made consecutively for 90 days. As of June 2025, 4.4% of all outstanding debt in the U.S. was in delinquency.
Not repaying a loan can have serious consequences. It can damage your credit report and make it difficult to borrow in the future. Defaulting on a loan can also result in lawsuits or debt collection calls, and the creditor may seize your assets if the debt is secured.
Partner with TurboDebt® To Relieve Consumer Debt
If you’re finding it difficult to keep up with payments on unsecured consumer debts, you may want to consider debt relief programs like settlement or consolidation. At TurboDebt®, we partner with consumers to create a debt relief plan tailored to your financial needs.
Here are a few more reasons we think you'd benefit from working with us:
- No upfront or late fees
- Affordable monthly payments
- Become debt-free in 12-48 months
- Get expert help negotiating your debt payoff
- Saving of up to 50% of your original debt (before fees)
We've amassed over 20,000 positive reviews from clients who've paid off thousands of dollars in unsecured consumer debt. It only takes a few minutes to start a free consultation and find out if you qualify for our debt relief program. Get started today with TurboDebt!