High levels of personal debt can lead to financial stress, anxiety, and even depression. It can also affect your credit score, making it harder to obtain loans or credit in the future. Additionally, it may limit your ability to pursue certain opportunities, such as buying a home or starting a business.
Debt could also be considered "bad" when it negatively impacts credit scores -- when you carry a lot of debt or when you're using much of the credit available to you (a high debt to credit ratio). Credit cards, particularly cards with a high interest rate, are a typical example.
The adverse health impacts of unsecured debt include stress, anxiety, depression, and high blood pressure.
People experiencing debt collection activity are also more likely to report a range of psychological harms, such as feeling lonely, isolated, constantly under strain, less able to face problems or struggle with overcoming difficulties or thinking clearly.
At high debt levels, governments have less capacity to provide support for ailing banks, and if they do, sovereign borrowing costs may rise further. At the same time, the more banks hold of their countries' sovereign debt, the more exposed their balance sheet is to the sovereign's fiscal fragility.
While debt may seem like a quick solution to immediate needs or desires, it can actually hinder your long-term financial goals. The consequences of debt are significant and often overlooked, from high interest rates and fees to limiting your ability to invest in your future.
Becoming debt-free has numerous mental health benefits, ranging from less stress and more confidence to a sunnier outlook on life. In that same report, the NIH stated that people who pay off debt “experienced greater improvements in cognitive functioning” and “reported less anxiety.”
Money can be a safety net; without it, you may feel vulnerable and anxious. And all the worrying about unpaid bills or loss of income can trigger anxiety symptoms such as a pounding heartbeat, sweating, shaking, or even panic attacks. Relationship difficulties.
If it's between 43% to 50%, take action to reduce your debt load; consulting a nonprofit credit counseling agency may be helpful. If it's 50% or more, your debt load is high risk; consider getting advice from a bankruptcy attorney.
Studies have shown that individuals who struggle with debt are more likely to also suffer from depression and anxiety. This may show itself in several areas of your physical wellness, including: Headaches; Lack of quality sleep; and.
Examples of Bad Debt
High-interest loans: Loans that have unusually high fees or interest rates include high-rate installment loans that you find online, payday loans and auto title loans.
You don't have interest payments and fees, which results in lower overall living expenses. You can redirect money toward savings and investments to grow wealth over time. You get to make decisions based on your personal goals instead of debt obligations.
Reduced Public Investment
As the federal debt mounts, the government will spend more of its budget on interest costs, increasingly crowding out public investments that are critical to economic growth. Right now, the United States spends over $2.4 billion per day on interest payments.
Our wants can be insatiable—the more we get, the more we want. This can lead to large debt and all the stress it brings. Greater materialism is associated with a host of negative effects: lower self-esteem, greater narcissism, less empathy, and more conflicted relationships.
Money problems can affect your social life and relationships. You might feel lonely or isolated, or like you can't afford to do the things you want to.
Economic instability can cause job loss and other financial hardships that can negatively impact mental health. Additionally, job loss can lead to feelings of failure and insecurity, which can lead to depression and anxiety.
Job openings remain high, and the unemployment rate has held below 4% for more than two years straight. But Americans are also grappling with the highest interest rates in two decades and chronically high inflation that has made the cost of everyday necessities like groceries, rent and gasoline far more expensive.
There's a strong link between debt and poor mental health. People with debt are more likely to face common mental health issues, such as prolonged stress, depression, and anxiety. Debt can affect your physical well-being, too. This is especially true if the stigma of debt is keeping you from asking for help.
A debt doesn't generally expire or disappear until its paid, but in many states, there may be a time limit on how long creditors or debt collectors can use legal action to collect a debt.
In order to get rid of the stress of bad debt, you should look into available debt relief options. There are many available debt reduction strategies that can help lead you to debt elimination. From credit counseling and bankruptcy to debt management and settlement, you're never without ways to recover from debt.
According to Experian, average total consumer household debt in 2023 is $104,215. That's up 11% from 2020, when average total consumer debt was $92,727.
Debt affects your life financially, emotionally, mentally, and physically. It can cause anxiety, depression, and mental illness. It can cause a host of physical health problems. It can lead to debt denial.