The Debt Trap: Grant Cardone’s Warning on Consumer Debt

Real estate mogul Grant Cardone has made his stance on consumer debt crystal clear. In a recent post on X, he warned that debt doesn’t just slow people down financially—it traps them. “Consumer debt makes slaves!” Cardone declared, breaking down the dire consequences of being in debt into five main points: “Can’t invest, can’t keep up, pay extra for everything, can’t build net worth, never live stress-free.” His message resonates deeply in today’s economic climate, where consumer debt is reaching alarming levels.

The Rising Tide of Consumer Debt

Cardone’s warning reflects a growing concern in the U.S. as consumer debt continues to climb. According to recent statistics, Americans owe a staggering $18.2 trillion in consumer debt, with personal loan debt alone hitting a record $251 billion as of the fourth quarter of 2024. This marks a $6 billion increase from the previous year, highlighting a troubling trend.

The number of Americans with personal loans has also surged, reaching 24.5 million—up from 23.5 million a year earlier. While personal loans account for only 1.4% of all consumer debt, they represent 5% of non-mortgage debt. In comparison, credit card debt is significantly higher, sitting at $1.211 trillion, or 6.7% of total outstanding debt.

The Cost of Borrowing

The average personal loan balance per borrower stands at $11,607, with nearly half of borrowers taking out loans primarily to consolidate or refinance existing debt. Alarmingly, about 10% of borrowers use these loans to cover everyday bills, indicating a reliance on borrowed money for basic living expenses.

As Cardone aptly noted, “You pay extra for everything” when you’re trapped in debt. High interest rates exacerbate the situation. Borrowers with excellent credit scores—over 720—can expect personal loan APRs around 17.71%. In stark contrast, those with poor credit—below 560—face rates that can skyrocket to over 200%. This disparity highlights the financial burden that debt can impose, particularly on those already struggling.

The Growing Use of Personal Loans

Despite the high costs associated with personal loans, their usage is expected to grow. Many individuals are turning to personal loans as credit card debt rises. Interestingly, not all borrowers are in dire straits; some may be using loans for home renovations or other significant expenses. However, as Cardone warns, for those already stretched thin, taking on more debt can lead to serious stress and financial strain.

Delinquency rates also paint a cautionary picture. As of Q4 2024, 3.57% of personal loan accounts were 60 or more days past due. While this is an improvement from the previous year, it remains higher than delinquency rates for mortgages (1.29%) and credit cards (2.56%). These figures underscore the precarious position many borrowers find themselves in.

The Psychological Toll of Debt

Cardone’s message may be harsh, but it is undeniably timely. With debt balances climbing and millions relying on personal loans to stay afloat, his warning resonates: consumer debt doesn’t just drain your wallet—it can drain your peace of mind. The psychological burden of debt can lead to anxiety, stress, and a feeling of being trapped, making it difficult for individuals to focus on long-term financial goals.

Conclusion

In a world where consumer debt is becoming increasingly normalized, Grant Cardone’s warnings serve as a crucial reminder of the potential pitfalls of borrowing. His insights encourage individuals to reconsider their relationship with debt and to seek financial freedom rather than becoming enslaved by it. As the landscape of personal finance continues to evolve, understanding the implications of consumer debt is more important than ever. By prioritizing financial literacy and making informed decisions, individuals can work towards a more secure and stress-free financial future.