What Are the Dangers of Debt?

Debt helps people make purchases they could not otherwise afford by allowing people to pay items off with small monthly payments that include the price of the item as well as interest. Types of debt include secured loans such as mortgages and auto loans, unsecured loans such as personal loans, student loans, credit cards and lines of credit and debts from taxes, legal fees and medical expenses. Although debt can be helpful in many cases, it can also become a burden and a hazard to your financial and personal well-being.

Falling Behind

If you start falling behind on your debts, you may find that it is difficult to catch up. This is because you dig a deeper hole every month as interest and possible late fees add up. If you fall behind on payments for secured debts, the creditor may repossess the property. Late payments and increasing balances also show up on your credit report, which lowers your credit score.

Limited Credit

Having too much debt can affect how future creditors do business with you. Lenders want to ensure you have enough money to pay them back, but if you are already carrying a large debt load, the chances of the lender being able to count on you to make consistent payments goes down. High amounts of debt may result in higher interest rates, lower credit limits and loan amounts or outright denial of credit applications.

Credit Score

The Fair Isaac Corporation, which provides FICO credit scores for people's credit reports, states that 30 percent of a credit score depends on the amount of debt on the report. Since creditors report the credit limit, current balance, and payment history to credit reporting agencies, having late payments, high balances or multiple credit accounts with balances will cause your score to drop.

Health Problems

According to MSNBC, the stress of debt can also cause health problems in the form of head and body aches, ulcers and heart problems. People with large amounts of debt also report an increase in mental and emotional issues such as depression, anger and sleeplessness.