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Debt Affects More Than Your Budget

Posted By:  |  June 22, 2016  |  0 Comment(s)

The obvious consequence to being in debt is having less money. Each month, you have to budget for the minimum credit card payments on every credit card you own (and if you can, you’re probably paying more than that monthly minimum). But keeping a balance on credit cards punishes more than just your monthly budget. Having too much debt can be dangerous, and keeps people from doing things they want (traveling and shopping) and the things they need (purchasing a new car). Consider the following ways that having excessive debt is negatively impactful.

Credit Card Debt lowers your credit score

According to AboutMoney, 30% of one’s credit score is based on their debt amount.

High debt-to-income ratios can lower credit scores (check out exactly how in our last post). With a lower credit score, one is less likely to qualify for low interest rates on loans. If the credit score is too low, sometimes people will be ineligible to apply for desired loans. Usually, a reasonable or low debt-to-income ratio is required to apply for automobile, mortgage, and personal loans. Debt can actually keep someone from owning a home, or car.

Credit Card Debt means you cant qualify for financing

To qualify for low financing, banks often require a low debt-to-equity ratio. Additionally, financial services usually have a minimum credit score requirement. With a high debt-to-income ratio, one is potentially disqualified for loan consolidation, loan refinancing, and other financing options. SmallBusiness gives the example that if one’s debt-to-equity ratio is 2, and the bank’s cutoff is 1.5, the bank would most likely deny the loan.

Credit Card Debt means no financial freedom

People with huge amounts of debt typically feel like they cannot spend money on anything additional — like travel. Not all debt is from reckless behavior. A lot of people go into debt for reasons like education loans, disability, and illness. In an “Ask Stacy” article by MoneyTalksNews, Stacy Johnson explained she felt like she was drowning from debt, and that even gas, groceries, and utility bills just added to the financial burden. Even the necessities measured up to more money than Stacy and her husband brought in. She is not the only person experiencing this. People throughout the world feel weighed down and trapped by debt.
Credit Card Debt means unpleasant financial consequences
Having excessive debt and not being able to make payments can potentially lead to bankruptcy. To a less drastic degree, not making payments on time can higher interest rates, and accumulate late fees. It is just a never ending cycle that keeps getting more and more expensive.
Credit Card Debt means emotional torment
Living a life with debt where one feels they can never pay it all off is emotionally straining on the body. Often having a lot of debt can be overwhelming, and cause sleep deprivation, anxiety and depression. Feeling out of control from one’s finances can be scary.

Having excessive debt can take a huge negative toll on lives. If possible, it is best to try and prevent this situation before it starts. Especially since debt perpetuates higher interest rates — making the whole process more expensive than it already is.



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  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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