Getting into debt is much easier than getting out. Few people realize the true negative consequences of accepting being in debt as a part of everyday life. If you’re in debt, the time to become debt-free is now. Start by learning your options using Credello’s debt guide and create a plan that gets you out from under your student loans or credit cards as quickly as possible.
If you’re not aware of the ripple effect debt is causing, here are four big problems you’ll face that stop you from living your richest life.
Debt prevents you from securing future loans.
The more debt you carry, the higher your credit utilization rate will be on your credit report. The two most critical factors that affect your credit score are your utilization rate and the number of on-time payments you’ve made. If you have a low credit score, you become less appealing to creditors, limiting your chances of getting approved for mortgages or auto loans.
You may be approved for loans with a low or moderate credit score, but the interest rates you receive will be much higher than if your score was better. Don’t let debt cause you to miss out on milestones or have to pay more than someone else.
Debt reduces your options.
Being beholden to debt means that you have fewer options available for the way you live. Debt makes you stay in a job you hate, forces you to take on roommates you don’t want, or even sends you back to live with your parents. Don’t let debt limit your freedom by reducing what options you have.
Debt stops you from buying the things you want.
When paying off credit cards, you need to allot more money in your budget to pay interest or annual fees. Since you most likely have a limited supply of money, that means other purchases will need to be put on hold. Whether it’s a vacation or candy bar, having debt gives you less wiggle room to purchase the things you want.
Debt costs you more money.
If you carry outstanding debt, you’ll have to pay interest until your balance is back to $0. Paying interest means that the original cost of whatever put you into debt is no longer the amount you pay; it’s just the base number on which interest gets tacked onto.
Consider this situation: You bought a shirt for $25 and paid with a credit card. When your statement comes out, instead of paying the full $25, you only pay $15, which leaves you with an outstanding balance of $10.
That $10 is charged an 18% interest rate means that you’ll now pay an additional $0.18 for that shirt. Now your balance is $10.18. If you don’t pay back that amount when your statement rolls around, you’ll then pay interest on top of that $0.18 interest fee you’ve received. That shirt no longer costs you $25; it’s now $25 plus 18% on whatever is leftover until you completely pay off your card.
If you make other purchases with that credit card, the same thing will happen with those. Debt increases the cost of every purchase you make, making the things you buy more expensive and costing you money unnecessarily.
The bottom line.
Don’t let your debt stop you from living life to the fullest. Take some time to consider these four areas debt touches and decide right now to stop accepting anything but living your richest life possible.
Lisa has a Bachelor’s of Science in Communication Arts. She is an experienced blogger who enjoys researching interesting facts, ideas, products, and other compelling concepts. In addition to writing, she likes photography and Photoshop.