Reasons Debt Is Bad for You

A little debt won’t hurt, will it? That’s how it starts. You make a small purchase on your credit card and then before you know it, have thousands of dollars in debt. But, what exactly is wrong with having a little – or a lot – of debt? A lot.

Encourages You to Spend More Than You Can Afford

Man holding shopping bags in mall, low section
Britt Erlanson / Getty Images

There’s something about the debt that tempts you to keep spending even when you can't afford the payments. Part of the allure of debt is the fact that you can get the emotional high from getting new things now, without having to deal with the pain of parting with the money now. It can feel like you’re getting something for nothing. But eventually, that spending will catch up with you, and it won't feel so good then.

Costs Money

Cropped image of senior man with bills doing online payment at home
Maskot / Getty Images

Debt feels free when you're swiping your card or signing loan documents, but it’s not free at all. In general, you pay a price for the debt you create. That price comes in the form of interest. The higher the interest rate, the more you’ll end up paying for your debt. Also, the longer it takes you to pay off and the higher your debt load, the more interest you’ll pay.

The only exception is an interest-free loan or zero percent APR credit card promotion, but even that has a limit and can be lost if you default on your payments.

Borrows From Your Future Income

Paper pay slip with tax and pension information
tattywelshie / Getty Images

Anytime you take out a loan or charge something on your credit card; you’re borrowing from the money you hope to earn in the future. Do you want to spend your money paying for something you've already used up and don't get much value from anymore?

High Interest Rate Debt Causes You to Pay More Than the Item Cost

Close-up of a financial paper
Glow Images, Inc / Getty Images

If you buy a $2,000 living room set on your credit card at 11% and only make the minimum payment, you’ll end up paying more than $3,400 by the time you completely pay off the debt. That’s $1,400 more than the furniture cost. Even if you raised your monthly payment to $100 and paid off the balance, you’d still pay close to $220 more than the cost of the furniture. On the other hand, you could set aside $150 month for 14 months and purchase in full at no extra cost.

Keeps You From Accomplishing Your Financial Goals.

Cropped Image Of Hand Putting Coins In Jars With Plants
Theerapan Bhumirat / EyeEm / Getty Images

Monthly debt payments limit the amount of money you have to spend on other things, not just retirement, but the trip you always wanted to take or Christmas presents for your family. The more debt you accumulate, the more your monthly payments will be, and the less you have to spend on everything else.

Debt Can Keep You From Owning a Home.

House sell buy rent keyboard
Peter Dazeley / Getty Images

Credit card, auto, and student loan debt are all considered when applying for a home loan. If your other debt payments are too high, you may get turned down for a mortgage loan. That means you’ll be stuck renting, or on your current mortgage until you pay off some of your other debt.

It Can Lead to Stress and Serious Medical Problems.

The long hours are getting to him
PeopleImages / Getty Images

When you have debt, it’s hard not to worry about how you’re going to make your payments or how you’ll keep from taking on more debt to make ends meet. The stress from debt can lead to mild to severe health problems including ulcers, migraines, depression, and even heart attacks.

Can Hurt Your Marriage

Financial problems
Geber86 / Getty Images

Debt puts unnecessary pressure on the household’s finances and creates a lack of financial security for your spouse and your children. Debt can spark arguments about who ​is creating debt, how much debt is too much, and who’s responsible for the debt that’s accumulated. These fights can escalate and lead to a breakdown in the marriage.

Hurts Your Credit Score

Excellent Credit Score
courtneyk / Getty Images

Part of your credit score – 30% to be exact – is based on the amount of debt you have. The more debt you have compared to your credit limits and original loan balances, the lower your credit score will be. Even if you’re not shopping for a credit card or loan, your credit score affects your life and the cost of other products and services, like auto insurance.