What are the effects of debt?

77443269_MMoney can’t solve all of life’s problems. True, but it can solve all money-related problems, and as we all know, they’re A LOT. Money can’t buy happiness. True, again, but you know what’s going to take away happiness? Being entrenched in debt.

It’s surprising how living in debt is quite the norm. At the moment, the total United States consumer debt is $13.86 trillion. That includes credit cards, auto loans, mortgages, and student loans.

Debt can have many impacts on a person’s life, and severely hinder a person from attaining their goal. But it’s funny how debt quickly grows; from making a small purchase from that credit card, to making expensive purchases to maintain our lifestyles.

Here are the top 9 effects of debt on a person:

Debt Creates the Illusion of Plenty

How cool is the fact that you can make purchases even when you can’t afford it? Very cool! Thanks to credit cards. When we buy what we desire, we get an emotional high. The anticipation and pleasure create excitement because the dopamine receptors in your brains are activated.

That’s why it’s quite common to buy more than you bargained for whenever you go shopping. You feel like you’re getting it for free. But it’s just an illusion and it will eventually catch up. According to Experian, in 2019, the average American household carried $6,194 in credit card debt.

Debt can be Expensive

Swiping your card or signing a loan document makes you feel good. You may even feel you’re getting a good deal. But in reality, debts are generally not free. The amount you pay for your debt is called “interest”. The higher the interest rate, the higher you’re going to pay. And the longer you take to make payments, the higher you pay. It’s like a vicious that that can soon become disastrous if trapped in it.

The only exception is interest-free loans and zero percent APR credit card, but they have a monetary limit and the privilege can be lost if you default on your payments.

Debt is Spending from Your Future.

There’s no sugarcoating it, when you get into debt, you’re sacrificing your future income. We all have plans for the future; maybe you want to go on a vacation, buy a home, develop a robust investment portfolio. By piling up debt now, it takes those aspirations farther away and in the worst-case scenario, they may never be actualized. It’s prudent not to mortgage your future.

Debt can lead to Serious Health Problem

The medical consensus is clear on this subject, and we know it’s true. Sleepless nights trying to figure out how to escape the debt trap. Constant call from creditors asking for their payments.

Do you know that money worries and mental health go hand in hand? That’s why mental conditions including major depression and anxiety are higher with people deep in debt.

Debt Causes Unprovoked Anger

If you come from a modest background, you would have experienced your parents getting angry over little things especially when overwhelmed with their debt. Maybe it even happens to you. In the medical community, it’s referred to as Debt-Anger Syndrome.

Victims get mad about creditors who constantly send them bills, mad at the mailman for delivering bills, mad at their spouses, children, bosses; just mad at life in general. This can have physiological impacts like migraines, heart disease, and even weaken the immune system.

Debt Can Have Devastating Impact on Your Marriage

In case you don’t know, sex and money consistently rank as the top two reasons why couples fight. One partner just can’t get enough of what they perceive as a scarce commodity. When there is a lack of financial security in a family, it creates unnecessary pressure. Arguments quickly devolve into fights about poor spending habits; who is spending too much or creating more debt. Such fights may escalate and lead to the breakdown of the marriage.

Debt Impacts Your Credit Score

About 30% of your credit score is determined by the amount of debt you have compared to your credit limits. Having a low credit score can make it harder to get a car and home loans, and even qualify for credit card accounts. Even if you’re offered a loan, it’ll be at a higher interest rate because you’re considered ‘high-risk.’ It sounds counterintuitive because you don’t have enough money but yet, you pay more for borrowing.

Debt May Lead to Bankruptcy

There’s a limit where it just becomes practically impossible to pay your debt. At this point, you might have to file for bankruptcy. In 2019, there were 752,160 cases of personal bankruptcy filed nationwide in the United States. There are three types of bankruptcy, Chapter 7, Chapter 11, and Chapter 13. Depending on the type you file, your non-exempt assets might have to be sold to clear off part of your debt. Bankruptcy hurts your credit score and it remains on your credit report for 7 years (in the case of Chapter 13) and 10 years (in the case of Chapter 7).

Debt causes Regret and Embarrassment

Trying to recover from debt can be extremely difficult, depending on how deep you are in debt. At that point, you start thinking about how wiser financial decisions would have prevented you from being in your current mess. To make matters worse, the interest rate accrues and you now face a mountain of debt to clear.

Once regret subsides and reality sets in, a period of embarrassment begins. Nobody is ever proud of telling people they can go out to dinner or participate in an event because they’re deep in debt. The larger the debt, the larger the feeling of embarrassment.


At the start of it, debt seems pleasurable as it offers the promise of having what you cannot afford. But with time, it grows into a humongous monster that haunts you far into the future. Developing a sound financial plan is crucial to avoid falling into the vicious cycle of debt. Contact us today for help.

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