Is debt dangerous to you? Get all the facts about debt you need in 2022.
Yes, debt could literally mean the death of you and your success.
Here are the 9 most essential facts to prevent debt and steadily get yourself out of the high-risk bracket so you can reach your goals.
#1. Unhealthy Debt Denies Affordability
Unhealthy debt can prevent you from affording the things you desire.
Your spending habits could spiral out of control and cause further problems in other areas of life.
You have a much better chance at success if you stick with a budget that is realistic for your income level and limit overspending so you can afford that holiday.
The need for not only basic necessities but also material and luxury items to keep up with the expectations of modern society has driven many into the darkness of debt.
Leading to a lifetime of bills and not blessings.
#2. High-Interest Debt Could Mean Death
High-interest loans and higher purchases could cause you to spend more than the item actually costs in interest payments alone over time.
Debt is expensive and difficult to pay back.
You need a plan for how you’re going to get out of debt you may have incurred as paying off high-interest debt can take years or even decades, depending on the amount owed and your payment frequency.
#3. Debt Limits Financial Goals
High amounts of debt will stand in the way of you buying that dream home or car as Lenders don’t often give loans and mortgages to those who have debt and prefer a clean financial commitment.
Paying off more bills than are necessary amounts to not much extra spend left for you to achieve your goals.
#4. Unpaid Balances Bring Raised Rates
The amount of debt you have, or not, plays a difference in the rate percentage given to you.
The rate of increase is determined by the creditor1 and this is not always predictable.
Less debt means lower rates but beware of high debt as it makes this difficult.
Rates accumulate over time and can become very hard to resolve.
Sit and work out a plan with those who share your life to stay debt-free so you can enjoy the fruits of your earnings.
#5: Don’t Let Bankruptcy Be Your Bailout
If you cannot pay off your debts in time, declaring bankruptcy may be the last resort.
But you don’t want this to happen.
You have to take measures to get out of debt before it becomes too difficult as debt is not something that just disappears on its own.
High interest rates as well as other factors like unemployment can bury you in debt.
#6. Bad Debt Ends At Negative Credit Reports
Debt that isn’t paid off on time will be included in your credit report and affect your scores.
A bad credit report2 can keep you from being approved for anything else, like a loan or mortgage, as well as increase the rates at which interest accrues.
Having a bad credit record can keep your life in limbo until you find the means to clear your credit record by paying off bills and this could take years.
#7. Don’t Become a Slave to Debt
It may not be noticeable at first but as the months turn into years, it becomes like a ball and chain hanging over your head and can spiral out of control.
You may eventually have no other option than to pay off or declare bankruptcy,
Especially when you could reach the stage of being barred from purchase by the credit bureau or your credit cards may be maxed out.
#8. Debt Affects Health & Wellbeing
According to the American Psychological Association3, debt causes a lot of stress and anxiety which can seriously affect your health.
A resort to using credit cards, overdrafts and high-interest loans to survive can lead to more debt and adds to the anxiety.
Some studies have shown that those with high levels of credit card debt are at an increased risk for depression and other serious illnesses like diabetes or heart disease.
#9. Debt Can Risk Your Relationships
The stress and anxiety associated with debt may cause a huge effect on relationships between spouses,
Partners or even friends who could have found themselves at the bottom of a pile of bills without having relief options like a family or community to support them in crises.
Even this avenue causes stress in relationships and personal self-confidence.
Debt can also lead to economic abuse in families as well as child labor and all-around sacrifices made towards having a fulfilling life.
#10. Medical Debt Has the Biggest Effect on People’s Satisfaction
The report found that medical debt has the biggest effect on people’s life satisfaction.
This is because of all types of debt, it creates a bigger financial burden than any other type.
When an individual cannot pay their bills for healthcare services rendered, they then feel guilt or shame which impacts their overall happiness.
#11. Millennials Have the Lowest Average Credit Card Debt
One of the biggest misconceptions about millennials is that they spend a lot and have high levels of credit card debt.
The reality is, most millennials don’t even own one a credit card.
#12. When Do New Couples Reveal Their Debt?
Studies found that the average couple only reveals their debt 10 months into their relationship.
This is because couples are often very secretive about their debt when they first start dating.
#13. The UK Government Is the Largest Debtor in the World.
A quarter of UK government debt is owed to the UK government itself.
In fact, a quarter of all government debt owed, is owed by one country to itself: The United Kingdom
#14.The UK Government Is Virtually Paying the Lowest Amount of Interest on Its Debt
st rates1 on the UK government’s debt are at their lowest level they’ve been in decades.
In fact, Britain is currently able to borrow cheaply by global standards and has been since 2016 – when it was first allowed a return to international capital markets for three months.
#15. Unsecured Personal Debt Is Rising Rapidly
In the UK, unsecured personal debt is rising rapidly and a lot of this has to do with credit cards.
The average consumer in the UK spends £16-billion each year on interest payments for their card balances.
#16. People Vastly Underestimate Their Debt
The report found that many people vastly underestimate how much they owe.
What’s more, 50% of UK adults who don’t have a mortgage2 say their housing costs are less than £750 per month.
#17. Credit Card Debt is 22% Greater Than People’s Savings
The report found that 22% of people in the UK have more credit card debt than savings.
As a result, they are living paycheck to paycheck and one unexpected expense could be enough to send them into poverty.
#18. Auto Loan Delinquencies Are up 21% Since 2012
he report found that auto loan delinquencies are up by 21% since the year 2012.
Since then, many people have been struggling to find steady employment and make ends meet – which has led them into a vicious cycle of debt.
#19. Baby Boomers & Gen Xers Have the Most Debt
The report found that Baby Boomers and Gen-Xers have the most debt.
This is because they’re nearing retirement age3, which means their mortgage has probably been paid off; but many of them also find themselves with too few financial resources to retire in comfort.
What Are the Risks Associated With Carrying High Levels of Debt?
The risks associated with carrying high levels of debt, such as credit card and mortgage debts, simultaneously are that you may not be able to repay them without going into bankruptcy. The interest rates on mortgages is higher than the interest rate for student loans or personal lines of credit like a home equity loan.
In addition, if you stop making payments on your primary residence and have no assets left then it’s more difficult to get another type of loan at all because they want collateral in order to provide further financing- but there would not be any available collateral in this scenario.
Why Should I Pay off My Debts Before Taking on Any New Ones?
Even if you are able to maintain a steady paycheck and pay off your debts over time, it is important to consider that the interest rates on mortgages could be higher than other types of loans.
If you stop making payments on your primary residence and have no assets left then it’s more difficult to get another type of loan at all because they want collateral in order to provide further financing- but there would not be any available collateral in this scenario.
What Are the Long Term Effects of Debt?
The long term effects of debt can be devastating. These people may have to rack up more credit card balances in order to survive, which is compounding one problem with another.
They could also lose their homes and retirement savings when they are not able to make payments on the mortgages or other loans that they took out to finance these things- like a home equity line of credit (HELOC), for example.
Can I Get Rid Of My Debt by Filing for Bankruptcy?
For most people, this is not an option. Instead of getting rid of debt by filing for bankruptcy, it might be more worthwhile to pay off the debts that are holding you back in order to get a fresh start and avoid being buried under them.
Don’t Let Debt Cripple You
Debt can be a crippling burden that you don’t need. If you are in debt, it is important to know the right way to get out of debt as well as how not to go into more debt.
It may seem like common sense but there are some steps people with debts often miss and end up paying for later on down the line – when they have less money or no money at all.
The steps outlined here, which include keeping a tight grip on your spending, maintaining good payment plans if you have purchased items with high interest, should ensure less stress and anxiety for you, your relationships and for you to enjoy your earnings.
Knowing these essential debt facts can help keep you from getting caught in a debt trap.