Debt impacts individuals' lives in a myriad of ways and can ruin relationships just as fast as credit ratings. Excessive or unmanageable debt can claim your earnings, ruin your credit score, prevent you from accessing money in the future and potentially result in foreclosure or bankruptcy. Furthermore, debt impacts individuals' emotional health and is a leading cause of divorce.
Fees and Your Credit Score
Excessive debt can grow through late fees and interest payments, compounding the problem. Furthermore, every month that a borrower does not keep up with payments negatively affects his credit score, and the damage often takes years to repair. Most people eventually need and can responsibly manage loans in order to buy a house, a car or pay for school. Lenders often refuse loan applications to applicants with low credit scores or charge the applicant much higher interest rates.
Foreclosure and Repossession
If an individual incurs excessive debt and defaults on a secured loan, such as a mortgage, a car note or even furniture, the lender can take back the purchase and auction it to cover the loan. According to the website Foreclosure Questions, a homeowner generally has only 90 days, after missing a payment, to contact the lender and pay before foreclosure or repossession begins. Not only can a person lose her property due to excessive debt, but between late charges and legal fees, the debtor can end up paying a lot more than if she had kept up with monthly payments.
Bankruptcy
If a person incurs so much debt that he has no hope of paying it off, he can file for bankruptcy protection. During bankruptcy proceedings, the individual's assets are auctioned off and the proceeds given to creditors. Debtors who file for Chapter 13 bankruptcy must also come up with a payment plan for their creditors. Bankruptcy dramatically affects credit scores, and individuals that have gone through bankruptcy have difficulty accessing any kind of credit or even trying to rent a house or apartment.
Emotional Toll
Excessive debt can result in losing your belongings, your home and the ability to access credit in the future. These circumstances can also cause considerable stress and can lead to depression. According to "USA Today" and "The Wall Street Journal," marriage counselors and debt consultants agree that excessive debt definitely damages relationships and is a leading factor in divorce.
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