Carrying debt is very commonplace in America today. In fact, U.S. households with debt in 2018 had average personal debt of more than $38,000—and that’s not even counting mortgages, which continue to be some of the largest debts people take on. The same data from Northwestern Mutual actually showed that Americans were two times as likely to owe between $5,000 and $25,000 than to have that amount saved.
Although we live in a world in which having substantial debt is extremely common, it’s best not to get too comfortable in this state. Why? Debt tends to lead to more debt, and once that cycle kicks off, it gets increasingly difficult to stop its momentum. Minor debt can very easily become major debt in a matter of months.
These six real-life consequences of struggling with major debt illustrate what consumers have to gain by reducing or eliminating debt in a timely manner.
Damage to Your Credit Score
Taking on debt and repaying it on time, in full, is a savvy strategy for building your credit score.
But struggling with major debt tends to lead to missed payments and perhaps even charge offs in which your original creditor must sell your debt to a collection agency because it’s so late. These occurrences negatively impact your credit score, as they’ll make future lenders think twice about wanting to work with you based on your inconsistent history of repayment.
Having a low credit score can also impact you in other ways, from boosting insurance premiums to limiting your options for housing.
Strained Personal Relationships
Money is already one of the main issues on which couples disagree. Adding debt into the mix can shake even the strongest of relationships. One Freedom Debt Relief review outlines this phenomenon in action: Chris Cataldo of Staten Island “saw his credit score and marriage crumble” when he and his now ex-wife amassed $60,000 in joint debt spread across 13 credit cards, each carrying an interest rate ranging from 20 to 25 percent.”
Cataldo eventually enrolled in debt settlement and negotiated a settlement for $8,000. He now lives much more modestly, paying off his balances each month. But his relationship did not survive the ordeal. This is just one example of the strain debt can put on personal relationships.
Negative Emotional and Physical Side-Effects
Not only can debt strain relationships, but it can also cause a wide range of negative emotions: stress, anxiety, anger, denial, depression, denial and panic to name a few. These mental health issues can in turn cause physical side-effects to manifest, creating an all-around bad situation for mind and body alike.
Wage Garnishment/Foreclosure/Eviction
Carrying certain kinds of debt for too long can land you in hot water in the form of losing your assets. Wage garnishment entails creditors getting repayment directly from your source of income—meaning you automatically lose a portion of each paycheck. This occurs if creditors can get a successful court judgment against you for student loans or credit card debts.
You may also get evicted if you’re a renter swimming in debt, unable to keep up on what you owe month over month. If you own your home but find yourself faltering on your mortgage, you may face foreclosure.
Lack of Emergency & Retirement Savings
Last but not least, carrying major debt over time tends to seriously cut into how much you’re able to save for emergencies and retirement—two important foundations for financial health. If you’re always trying to pay down ever-building interest, it’s unlikely you’re going to be able to save as much for the future as you should.
These real-life consequences of carrying major debt can serve as a motivator for you to find a strategy that helps you eliminate those thousands you owe. Only then will you get your financial—and mental—freedom back.
