Why so many borrowers are stuck making minimum payments on their debts
CBS News · Angelica Leicht ·
For borrowers struggling to make progress on their debt, the problem may extend well beyond their spending habits.
Making your monthly debt payments on time should equate to making progress with paying off what you owe. It's not uncommon, though, particularly with certain types of debts — like high-rate credit card debt — to check your balances after months of consistent payments and find that you still owe nearly as much as you started with. That can make it difficult to see a way forward.
And for many borrowers, that's precisely what's happening right now, and a recent study from Freedom Debt Relief illustrates how widespread the problem has become. Of the 1,800 borrowers surveyed who are carrying at least $10,000 in unsecured debt, 28% report being able to afford only the minimum required payments. Another 20% say they are already behind on at least one account.
What's particularly concerning is that many of these borrowers are already making significant financial sacrifices to stay current on their payments. They're cutting discretionary spending, adjusting budgets and looking for ways to reduce what they owe, yet progress remains elusive. So, what's keeping so many borrowers trapped in the minimum-payment cycle and how can they break free? That's what we'll examine below.
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