Debt is a tough thing to deal with. It gets even harder when the amount of debt becomes too large for you to handle. There are a host of problems that come along with that scenario (the most obvious being bankruptcy).
Here are five of the consequences of excessive debt.
Can’t Buy a Home
Having too much debt can limit what you’re able to do in life. For instance, it can be difficult—if not impossible—to buy a home if you have too much debt. This isn’t just about you not being able to afford a mortgage payment. Most lenders won’t even extend you a loan if your debt load is too high.
Your debt-to-income ratio is the amount you pay each month in loan installments versus your overall income. A high ratio means a greater amount of your salary is already dedicated to paying back debt. Almost no one will give you money for a mortgage if your debt-to-income will be over 43 percent. This is seen as the level where debt repayment for that kind of loan starts to break down.
Pay Tons of Interest
Interest is what makes debt toxic for so many people. Not only does it increase the amount you end up paying by a significant amount, it stretches the life of the loan out much longer. The toll of interest, however, is highly determined by the type of debt. While it might seem like all debt is equally bad, some kinds are much worse than others.
For instance, mortgages and student loans are considered good debt. With a mortgage, you typically have a low interest rate and the loan is attached to something that appreciates in value. Student loans lead to you being able to make more money. On the other hand, credit card debt is going to come with a lot of interest and probably isn’t attached to something that will retain value.
Mental and Emotional Strain
Debt takes a big toll on your mental and emotional well-being too. No one feels good carrying a huge debt load. This can lead to unhappiness and even hopelessness. If you’re someone who feels spiritually crushed by your debt, it’s time to find a solution. Debt relief agencies can be hugely helpful for people who don’t have anywhere else to turn with their issues.
When you work with a debt relief organization, they’ll help find ways to reduce what you owe to a more manageable level. It’s important, however, you work with a team that has your best interests at heart. Not all players in this industry are the same. And some actively try to take advantage of vulnerable consumers. Many satisfied people have trusted Freedom Financial Network with their debt relief needs. They’re one of the most reliable names for people who need help.
Excessive debt can ruin the personal relationships in your life. For instance, it can drive a divide between spouses if they’re dealing with a difficult debt situation. There’s also a chance you’ve borrowed money from friends or family members in order to keep up with your debt. These people may treat you differently, or not want to talk to you at all, if you don’t pay them back.
May Have to Put Off Retirement
Your debt-to-income ratio will change drastically if you lose almost all your income. While Social Security provides some money for retirees, it’s typically not nearly as much as they make while they’re working. It’s important for people to pay off as much debt as possible before they reach retirement age.
Those who are unable to pay down enough of what they owe might be stuck working longer than they’d imagined. This can be a huge strain on people who planned to leave the workforce, but find themselves without the option.
No matter your relationship with debt, it can get to a point where it’s totally unmanageable. You’ll start to feel the consequences when it reaches that unsustainable level.