According to an article by CNBC, the average American is in more than $90,000 of debt. Despite the fact that debt is so common, it is very important to do your best not to find yourself in the same situation. There are several reasons going into debt is bad for you.
Debt Costs You More Money
Any bankruptcy attorney Maryland can tell you that when you go into debt, you end up owing more money than if you were to pay for something outright. Imagine you have a $2000 credit limit that has a 20% interest rate. This means that when you repay the $2,000, you’ll still owe an additional amount of $400. If you’re late on the payment, expect to pay even more, as many debt collectors also charge late fees. Keep in mind, too, that the longer it takes you to pay off your debt, the more you’ll end up paying as interest adds up. While there are 0% APR or interest-free loans available, they are few and far between, and you usually forfeit those benefits if you’re late on payments.
Debt May Keep You From Owning Your Own Home
If you are considering applying for a home loan, you may need to think again if you’re in debt. Home lenders look at how much student loan debt, auto loan debt, and credit card debt you have when determining whether to lend you money. If you already owe a large amount of money to other lenders, then you are less likely to be approved for a home loan. At a maximum, your current debt payments can’t take up more than 43% of your monthly income, but many lenders want it to be much lower than that. Until you pay down some of your debt, you’ll need to stick with your current home mortgage or continue to rent.
Too much debt can even cause you to become ill due to stress. If you’re already in debt and need help getting out, bankruptcy may be right for you. A local attorney can help you learn more about the different types of bankruptcy and whether one is right for you.