Loading the player...

DEFINITION of 'Consumer Debt'

Debts that are owed as a result of purchasing goods that are consumable and/or do not appreciate. Possessing high levels of consumer debt is not typically beneficial for the average individual because it increases the strain on one's sources of income to maintain regular payments. If not managed well, consumer debt can lead to bankruptcy.

BREAKING DOWN 'Consumer Debt'

Possessing some consumer debt can be beneficial under certain circumstances, such as debt accrued to buy something that will boost an individual's earning power. For example, financing a car might be a wise idea if the owner needs it to travel to work at a higher-paying job.

RELATED TERMS
  1. Debt Service

    The cash that is required for a particular time period to cover ...
  2. Debt

    An amount of money borrowed by one party from another, often ...
  3. Debt Snowball

    A method of debt repayment in which debtors pay off their smallest ...
  4. Debt Avalanche

    A method that involves making the minimum payment on each debt, ...
  5. Long-Term Debt To Capitalization ...

    A ratio showing the financial leverage of a firm, calculated ...
  6. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
Related Articles
  1. Personal Finance

    Why Debt Isn’t Always a Bad Thing

    When managed properly, debt can be used to achieve a higher overall rate of return.
  2. Insights

    The National Debt Explained

    We know it's growing, but we don't know exactly how. An in-depth look why the U.S. Government's debt continues to balloon and what it all means for you.
  3. Financial Advisor

    The 4 Best Debt Reduction Services

    It can be tricky to find the best debt reduction services for your financial situation. These top 4 debt consolidation firms help make the process easier.
  4. Investing

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  5. Personal Finance

    5 Reasons Why Debt Is Your Enemy

    Having debt can cost you both financially and mentally and can affect your retirement.
  6. Personal Finance

    Digging Out Of Personal Debt

    Good intentions can put consumers in even more personal debt.
  7. Personal Finance

    Good Debt Vs. Bad Debt

    Is there really such a thing as good debt and bad debt? Read on to find out.
  8. Investing

    Explaining Debt

    Debt is any amount a borrower owes a lender.
  9. Investing

    Evaluating a Company's Capital Structure

    Learn to use the composition of debt and equity to evaluate balance sheet strength.
RELATED FAQS
  1. What's the difference between debt consolidation and debt management or debt settlement?

    Learn about different ways of handling debt when you become overwhelmed, including debt consolidation, debt management and ... Read Answer >>
  2. How long do typical debt management plans take to pay off debt?

    Find out more about how debt management plans are administered and what circumstances determine how long a management plan ... Read Answer >>
  3. When should a business avoid debt financing?

    Read about the optimal use of debt in a business capital structure and how to know when a business should avoid further debt ... Read Answer >>
  4. What is the difference between the debt ratio of a company and the debt ratio of ...

    Discover the different financial evaluation measures that are most commonly applied to individuals and corporations, respectively. Read Answer >>
  5. Why is debt issued in both temporary and permanent forms?

    Debt is separated into two categories: 1) Temporary or short-term 2) Permanent or long-term. Temporary or short-term debt ... Read Answer >>
Trading Center