AI technology has received a lot of attention over the last couple of years. One survey found that 55% of people use it every day. Most of the discussions about AI center around using it to create art or use AI for roleplaying. However, many people are using it to manage their finances as well.
Both businesses and consumers are exploring ways to use AI to manage their debt more easily. AI is clearly going to transform the future of finance in the coming years.
AI is Making It Easier than Ever to Manage Debt
Both businesses and consumers are struggling with debt these days. The average debt for businesses and consumers is $195,000 and $103,358 respectively. Fortunately, AI is helping people manage it more easily.
The financial industry is spending more money on AI than ever before. One market research institution reports that the market size for AI in finance was $38.36 billion in 2024. That figure is expected to grow to over $190 billion by 2030.
Of course, this figure doesn’t include the number of everyday consumers that are using generative AI tools to manage their finances. It is impossible to know exactly how many people are using AI for financial management purposes, but many people report doing so.
There are many ways that people and businesses can use AI to manage their debt. Some of the biggest advantages are listed below.
Using Expense Tracking Apps
One of the biggest ways that AI can help consumers get their debt under control is through the use of expense tracking apps. These apps use AI technology to better understand consumer spending patterns.
The biggest way that they can help people improve their finances is by identifying subscriptions that they forgot about. The average person spends $91 per month on subscription services each month, but some people spend a lot more. The cost of various subscriptions can add up to over $300 a month for some people.
People that use AI-based expense tracking apps can significantly reduce their monthly expenditures. This gives them more money to spend paying down existing debt.
Helping Prioritize Debt Obligations
People and businesses have different philosophies when it comes to paying off debt. Some like to use the snowball effect, which involves paying off the smallest debts first, so they can have fewer accounts to manage. Others prioritize paying off the highest interest debts, so they can save money on interest expenses. This approach makes more sense, but it isn’t always the best option. Higher interest debts sometimes have more generous repayment terms or protection options. For example, government student loans tend to have higher interest rates, but they give borrowers more options with forgiveness and income-based repayment plans.
It can be tricky to prioritize debt payoff. Fortunately, AI tools make the process a lot easier. People can share their priorities, and the AI interface can come up with a nuanced plan that aligns with their goals Based on the different types of debt that they have.
Analyzing Debt in Real-Time
A number of different AI tools also make it easier to track debt in real time. This can be important for a lot of people, since our financial status is very dynamic and quickly changes.
One of the biggest benefits of using AI to monitor debt in real time is that people can identify identity theft and other risks. This allows them to take quick action before the problems spiral out of control.
Streamline Negotiating Lower Debts
Sometimes the best way to reduce debt is to negotiate lower settlements. Some organizations would rather get a smaller payment than have the borrower default altogether.
Of course, these institutions don’t always make it easier to negotiate lower debt payments. You often have to jump through a number of hoops to do so.
This is where AI can be very helpful. There are a lot of AI tools that make it easier to automate and streamline communications between debtors and borrowers.
AI Has Its Limitations with Debt Management
Although there are a lot of benefits of using AI for debt management, there are some downsides too. One Financial advisor used a generative AI tool to see what advice it provided for someone in debt. They found that there was a lot of room for improvement.
You will get better results if you use the right AI tools. Generative AI tools that specialize in creating text may not be especially helpful for debt management. It is better to use specialized tools designed for people trying to improve their finances.
As with any technology, AI can be helpful or destructive. It depends on how you use it. If you’re going to use AI to manage your debt, then you need to use the right tools and understand how to use them responsibly.