Consumer debt

In economics, consumer debt is the amount owed by consumers (as opposed to amounts owed by businesses or governments). It includes debts incurred on purchase of goods that are consumable and/or do not appreciate. In macroeconomic terms, it is debt which is used to fund consumption rather than investment. [1]

The most common forms of consumer debt are credit card debt, payday loans, and other consumer finance, which are often at higher interest rates than long-term secured loans, such as mortgages.

Long-term consumer debt is often considered fiscally suboptimal. While some consumer items such as automobiles may be marketed as having high levels of utility that justify incurring short-term debt, most consumer goods are not. For example, incurring high-interest consumer debt through buying a big-screen television "now", rather than saving for it, cannot usually be financially justified by the subjective benefits of having the television early.

In many countries, the ease with which individuals can accumulate consumer debt beyond their means to repay has precipitated a growth industry in debt consolidation and credit counseling.

The amount of debt outstanding versus the consumer's disposable income is expressed as the consumer leverage ratio. On a monthly basis, this debt ratio is advised to be no more than 20 percent of an individuals take-home pay.[2] The interest rate charged depends on a range of factors, including the economic climate, perceived ability of the customer to repay, competitive pressures from other lenders, and the inherent structure and security of the credit product. Rates generally range from 0.25 percent above base rate, to well into double figures. Consumer debt is also associated with predatory lending, although there is much debate as to what exactly constitutes predatory lending.

In recent years, an alternative analysis might view consumer debt as a way to increase domestic production, on the grounds that if credit is easily available, the increased demand for consumer goods should cause an increase of overall domestic production. The permanent income hypothesis suggests that consumers take debt to smooth consumption throughout their lives, borrowing to finance expenditures (particularly housing and schooling) earlier in their lives and paying down debt during higher-earning periods.

Personal debt is on the rise, particularly in the United States and the United Kingdom. However, according to the US Federal Reserve, the US household debt service ratio is at the lowest level since its peak in the Fall of 2007.[3]

debt-to-GDP ratio, consumer leverage ratio

A country's private debt can be measured as a 'debt-to-GDP ratio', which is the total outstanding private debt of its residents divided by that nation's annual GDP. A variant is the consumer leverage ratio, which is the ratio of debt to personal income.

List of countries

List of countries by consumer debt as % of GDP
Country/Region 1960[4] 2016[5]
 Afghanistan   3.6
 Albania   34.5
 Algeria   23.5
 American Samoa (US)    
 Andorra    
 Angola   21.0
 Antigua and Barbuda   48.3
 Argentina   14.0
 Armenia   48.9
 Aruba (Netherlands)    
 Australia   142.9
 Austria   85.6
 Azerbaijan   26.6
 Bahamas, The   68.2
 Bahrain    
 Bangladesh   44.4
 Barbados    
 Belarus   25.9
 Belgium   64.7
 Belize   56.8
 Benin   21.8
 Bermuda (UK)    
 Bhutan   46.5
 Bolivia   64.2
 Bosnia and Herzegovina   54.3
 Botswana   32.3
 Brazil   62.2
 British Virgin Islands (UK)    
 Brunei   44.3
 Bulgaria   53.6
 Burkina Faso   26.6
 Burundi   16.7
 Cabo Verde   63.0
 Cambodia   69.7
 Cameroon   20.8
 Canada    
 Cayman Islands (UK)    
 Central African Republic 11.2 12.8
 Chad 3.5 10.2
 Channel Islands (UK)    
 Chile 22.1 112.1
 China   156.7
 Colombia 22.9 47.1
 Comoros   26.5
 Congo, Dem. Rep.   7.8
 Congo, Rep. 22.2 25.0
 Costa Rica 27.0 59.3
 Côte d'Ivoire   22.7
 Croatia   61.6
 Cuba    
 Curaçao (Netherlands)    
 Cyprus   230.1
 Czech Republic   51.8
 Denmark 44.5  
 Djibouti    
 Dominica   51.5
 Dominican Republic 5.8 28.4
 Ecuador 25.6 29.4
 Egypt   34.1
 El Salvador   45.6
 Equatorial Guinea   19.1
 Eritrea    
 Estonia   72.6
 Eswatini (Swaziland)   21.6
 Ethiopia    
 Faroe Islands (Denmark)    
 Fiji   89.9
 Finland 36.8 95.5
 France 20.0 97.6
 French Polynesia (France)    
 Gabon 8.2 13.6
 Gambia, The    
 Georgia   62.0
 Germany   77.5
 Ghana 4.6 19.6
 Gibraltar    
 Greece 12.2 107.7
 Greenland (Denmark)    
 Grenada   56.1
 Guam (US)    
 Guatemala 10.1 34.3
 Guinea   12.9
 Guinea-Bissau   7.1
 Guyana 11.2 45.5
 Haiti   18.3
 Honduras 9.9 56.3
 Hong Kong   203.8
 Hungary   34.9
 Iceland 46.9 87.3
 India 7.9 49.8
 Indonesia   39.4
 Iran 12.9  
 Iraq 8.5  
 Ireland 30.1 49.2
 Isle of Man (UK)    
 Israel 13.5 65.4
 Italy   86.1
 Jamaica 15.7 32.1
 Japan 56.3 185.0
 Jordan   75.1
 Kazakhstan   34.3
 Kenya   32.9
 Kiribati    
 North Korea    
 South Korea 5.7 143.3
 Kosovo   39.3
 Kuwait    
 Kyrgyzstan   21.2
 Laos    
 Latvia   67.4
 Lebanon   111.9
 Lesotho   17.5
 Liberia    
 Libya    
 Liechtenstein    
 Lithuania   43.0
 Luxembourg   100.1
 Macau   118.1
 Macedonia, Rep.   47.4
 Madagascar   13.2
 Malawi   10.5
 Malaysia 8.9 124.0
 Maldives   37.3
 Mali   25.4
 Malta   87.1
 Marshall Islands    
 Mauritania    
 Mauritius   96.4
 Mexico 20.6 35.0
 Micronesia, Fed. Sts.   23.4
 Moldova   30.6
 Monaco    
 Mongolia   58.7
 Montenegro   51.2
 Morocco 12.0 65.4
 Mozambique   34.5
 Myanmar 6.2 20.7
 Namibia   56.7
 Nauru    
   Nepal 1.0 81.0
 Netherlands 18.4 111.2
 New Caledonia (France)    
 New Zealand 15.5  
 Nicaragua 15.4 38.7
 Niger   13.7
 Nigeria 3.7 15.7
 Northern Mariana Islands (US)    
 Norway 32.7 145.0
 Oman   75.6
 Pakistan 11.1 16.2
 Palau    
 Palestinian territories   42.0
 Panama 17.8 91.0
 Papua New Guinea    
 Paraguay 9.1 54.4
 Peru 12.5 36.2
 Philippines 12.0 44.7
 Poland   54.8
 Portugal 39.5 112.2
 Puerto Rico (US)    
 Qatar   79.4
 Romania   28.2
 Russia    
 Rwanda   21.2
 Samoa   80.1
 San Marino    
 São Tomé and Príncipe   26.4
 Saudi Arabia   58.0
 Senegal 14.8 33.1
 Serbia   44.1
 Seychelles   26.9
 Sierra Leone 2.8 5.6
 Singapore   132.9
 Sint Maarten (Netherlands)    
 Slovakia   57.1
 Slovenia   47.4
 Solomon Islands   39.0
 Somalia    
 South Africa   144.7
 South Sudan    
 Spain 31.4 111.8
 Sri Lanka 7.3 46.0
 St. Kitts and Nevis   56.5
 St. Lucia   86.8
Template:Country data St. Martin (France)    
 St. Vincent and the Grenadines   50.8
 Sudan 8.9 8.9
 Suriname   33.3
 Sweden 38.2 129.6
  Switzerland 96.0 177.7
 Syria 25.3  
 Taiwan    
 Tajikistan   19.2
 Tanzania   14.3
 Thailand 10.1 147.4
 Timor-Leste    
 Togo   39.3
 Tonga   38.1
 Trinidad and Tobago 8.5 41.3
 Tunisia   81.2
 Turkey 17.7 70.3
 Turkmenistan    
 Turks and Caicos Islands (UK)    
 Tuvalu    
 Uganda 6.5 13.7
 Ukraine   47.3
 United Arab Emirates   85.9
 United Kingdom 17.6 135.9
 United States 70.9 192.7
 Uruguay 31.0 28.2
 Uzbekistan    
 Vanuatu   68.5
 Venezuela 14.0  
 Vietnam   123.8
 US Virgin Islands (US)    
 Yemen    
 Zambia   13.0
 Zimbabwe    

See also

References

  1. "Consumer Debt Definition". Investopedia. Retrieved August 24, 2011.
  2. "Alternatives to Filing for Bankruptcy". www.moneymanagement.org. Retrieved 2016-07-29.
  3. US Federal Reserve. "Household Debt Service and Financial Obligations Ratios". Household Debt Service and Financial Obligations Ratios. Retrieved December 4, 2012.
  4. https://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS
  5. https://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS
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