In the process of reaching your life goals, you might accumulate debt along the way. Millions of Americans carry student loans, credit card debt, and mortgages. One important factor many don’t consider is how geographic location impacts your overall debt burden.
A recent study released by Credible looked at 540,000 borrowers from all 50 U.S. states analyzing the average monthly debt payment (credit card, student loan and housing). The information about debt-to-income ratios gives us an idea about which states might provide you a financial advantage.
Low Debt-to-Income States
According to the report, Michigan, Arkansas, Delaware, Kentucky, and Missouri had the lowest debt-to-income ratios. For example, Michigan residents spent just 25.3% of their monthly income on credit card, student loan, and housing payments. Michigan had the best score of all in the study.
High Debt-to-Income States
On the other end of the spectrum, Hawaii, Washington, Colorado, Oregon, and Montana had the highest average debt-to-income ratios. If you live in Hawaii, you spend an average of 36.2% of your monthly income on debt payments. That means for the average annual income of $56,889 in Hawaii, $20,593 goes towards loan payments. Hawaiians pay more debt per dollar earned than any other state in the country.
What Causes the Difference?
Are Hawaiians spend happy and residents of Michigan frugal by nature? Maybe, but the full explanation for the differences probably has more to do with macroeconomic factors in each state. In Michigan, the lower cost of living shows up as lower housing, credit card, and student loan payments. Needless to say, housing costs in the Hawaiian islands are very high.
Where You Live Affects Your Debt Load
Where you live affects your debt burden, and the data proves this point. All other things being equal, the state you live in can have a significant impact on your financial health.
Read the Credible report: Burdened by Debt: The Best and Worst States at Managing Debt.
