Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Find Out If You Qualify For Debt Relief
Free, No-commitment Estimate
Get Started Today
In the story of personal finance, debt reliably gets cast as a villain. It has been labeled by at least one finance guru as a “dirty four-letter” word and said to be “out of control” and keeping consumers “in chains,” among other epithets. Being debt free is often considered as one of the most desirable traits a person can have—just a bit short of financial nirvana.
However villainous and imprisoning it may be, debt is not exactly a rarity or a small feature of the economic landscape. About 80% of consumers owe somebody some money for something, and 48% of lower income adults who lost a job or wages during the pandemic have taken on additional debt, according to Pew Research Center data.
And they owe a lot. Total household debt came to just under $15 trillion in the second quarter of 2021, according to a report on household debt and credit by the Federal Reserve Bank of New York. That is up a wallet-popping $812 billion from where it was just 18 months earlier, at the end of 2019.
But debt is more than a burden. Without the ability to borrow money, consumers would be hard-pressed to purchase homes or pay for college, both of which are perceived as generally savvy financial moves. Without people to buy homes, the construction industry would face much diminished demand for its products—bad news for construction workers, building materials suppliers and other parts of this important economic sector.
Generally speaking, the ability to borrow is an important feature of the U.S. economy and helps create and maintain healthy demand.
And debt is not, at least according to some perspectives, exactly out of control. The value of outstanding student loans actually declined in the second quarter of 2021, the Fed figures show. Likewise, home equity loans were down slightly. And the overall balance owed on the nation’s credit cards was less than where it stood a year before.
Still, while debt may not necessarily have the same effect on your personal finances as Godzilla did on Tokyo, it is important to keep an eye on it. Unless you are a multimillionaire—and sometimes even then—you are likely to benefit from knowing what your total debt is.
Why Figure Your Total Debt?
Knowing how much you owe is important in several ways. For one thing, if you apply for a mortgage loan, your chances of getting approved will hinge to a considerable degree on factors related to the amount of debt you are carrying. Specifically, lenders look closely at your debt-to-income ratio, which compares your income to your monthly debt payments, when deciding whether to sign off on a mortgage application.
Calculating your total debt is also important in managing your household budget. Payments on mortgages, car loans, student loans and credit card balances make up a significant portion of many consumers’ monthly total outflow. It’s next to impossible to come up with a workable budget unless you know how much you pay each month and how long you’ll have to keep paying. In other words, your total debt.
Finally, if you want to reach that debt-free nirvana, it will require a debt payoff plan. And whether you go with the debt avalanche plan, the debt snowball plan or some other method, that’s going to require knowing the terms of all your debt, including current balance, interest rate, term, minimum payment, penalties, collateral (if any) and more.
Challenges of Finding Total Debt
Despite its importance, it’s not always easy to put your finger on how much you owe. For one thing, there’s the possible innate and universal human tendency to forget borrowing money from somebody—while, of course, recalling with perfect clarity any time someone borrows from you.
Perhaps more importantly, there are lots of ways to borrow money, lots of places to get a loan and lots of reasons to do so. Some debts you owe may not even be recognize as debts. Here are some creditors many consumers owe money to:
- Banks
- Credit unions
- Retailers
- Auto dealers
- Finance companies
- Educational institutions
- Hospitals and doctors
- Governments
Even utility companies can be considered lenders, because you use the electricity, gas, water and other services they provide and don’t pay for them until later. To repay their debts, some consumers will borrow from their own retirement plans, while investors may borrow from their brokerage companies in order to trade securities on margin.
Loans from friends and family represent a notable absence from this list, which is based on government reports that don’t track these informal extensions of credit, or IOUs. However, an IOU is a loan, and should be considered when you’re calculating your total debt figure.
The types of debt are similarly numerous. They include:
- Mortgages
- Home equity loans
- Student loans
- Auto loans
- Boat, motorcycle and recreational vehicle loans
- Personal loans
- Vacation loans
- Wedding loans
In the end, you can borrow to buy just about anything, although federal regulators do impose some restrictions on investors borrowing on margin to buy securities. In order to make sense of your debt load, you have to figure out a way to cut through all this complexity and confusion to come up with a single figure. Here’s how to do that.
How to Find Out Your Total Debt
One of the most useful aspects of credit reports is that yours contains a detailed record of what you owe. So when you’re sitting down to add up your debts, step one is to request a copy of your credit report. Actually, you should request three copies, one from each of the big credit reporting bureaus: Equifax, Experian and TransUnion. You can request free copies of each at AnnualCreditReport.com.
Once you have the reports, go through them and identify all of your debts and their current balances. To be extra sure you have the right amounts, consider contacting the listed creditors to ask them how much you owe. This is especially important if there is a discrepancy between what you think you owe and the balance shown on the credit report.
Now write down the amount of each loan balance, along with perhaps the creditor and the purpose of the loan, in a spreadsheet or ordinary piece of lined notebook paper. Add them up.
Is that your total debt amount? Possibly. But you may still want to check further. As you examine the credit reports, you are likely to notice that some debts don’t show up on all of them. So don’t assume all your debts are on these reports.
Some debts, such as loans from friends or family, won’t ever appear on a credit report. Even some businesses don’t report debts to a credit bureau. So go over your records. Look in your files of financial papers, check unopened mail and otherwise do a thorough scan to make sure you’re not missing something.
Once you’ve perused the credit reports, your own records, your creditors’ records—and possibly your memories of jotting down an IOU after losing a hand of friendly poker or a wager on the outcome of a sports contest—add those amounts to your spreadsheet or notebook paper. The total of all these debts represents your total indebtedness.
Track With Apps
To stay on top of your debts in the future, you can harness technology. Entering debts in Quicken or other personal finance software can help track your total debt with a few keystrokes.
Personal finance apps such as Mint and Personal Capital can help automate data collection on your debts by grabbing data from financial institutions. This can be a very easy and accurate way to keep balances and payments up to date.
Wrapping Up Your Total Debt Load
Depending on how much of that nearly $15 trillion in U.S. consumer credit you personally owe, the amount of your personal debt load can be an important figure to know. This is especially true if you plan to apply for a loan, start following a budget or make a plan to pay off your debts.
If you start with the debts that appear on your credit reports, then add in any other debts that you can identify, it can be a relatively quick and easy job. And it’s worth doing. You don’t have to agree with the pundits who maintain that debt is a villainous enemy to realize that—when it comes to your total amount of debt—what you don’t know can hurt you.
Find Out If You Qualify For Debt Relief
Free, No-commitment Estimate
Get Started Today
Frequently Asked Questions (FAQs)
Why does my total debt matter?
Your debt load can make the difference in getting approved—or denied—for a mortgage or other loan. It also can affect the interest rate you’re asked to pay on future debts.
How many types of debt are there?
Debt can be divided into two types: unsecured debt and secured debt. Beyond that, major types include home mortgages, student loans, auto loans, credit cards and personal loans.
How does knowing my total debt help me manage my money?
Being aware of your total debt load is essential to developing a household budget you can stick to long term. It’s also, probably obviously, central to any decision about taking on more debt.