GreenT_M3_A1.Discussion

GreenT_M3_A1.Discussion - M3 A1 Interest Rates How is...

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M3 A1: Interest Rates How is consumer debt different today than in the past? “Over the past two decades, consumer debt has grown at an annual rate of 4.1 percent—much faster than the 0.6 percent growth of median household income. This has pushed debt-to-income ratios to record levels and has created severe financial hardship for many Americans,” Pressmen & Scott, 2010. One of the first types of consumer credit is traditional installment loans. This particular category of consumer debt has had an increase over the past several decades but has not had a dramatic increase in comparison to other categories of debt. In contrast, stretched over many decades the category of higher education debt has had more college graduates collecting extremely expensive diplomas. Upon completion of their education the debt incurred has increased the chances that they’ll have the need to borrow more in demand of financial intake until they become employed. (Pressmen & Scott, 2010) What role does interest rates play in mounting consumer debt? The simplicity of the role that extreme interest rates play on consumer debt can be described or compared to a vicious cycle. An informative and interesting article by Steven Pressmen and Robert Scott, (2010) on the national consumer debts incurred are on a rise for more household debt. For instance, the effects on economic
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