High-interest debt of all kinds can be financially ruinous for your family. It can cause you to lose important investment opportunities, hurt your family, and hurt your credit score. Scroll down and keep reading to find three ways that high-interest debt is dangerous, and some things you can do to avoid it.
Lost Investment Opportunity
High-interest debt can prevent you from taking advantage of lucrative future opportunities. For example, instead of paying high-interest debt, you could be investing your money for the future. In fact, many financial professionals argue that paying off your credit cards and other types of high interest debt is the best investment you can make. They say that money saved by not having debt is better than any return you could get by investing your money. When you do take out debt, according to Navy Federal Credit Union, it’s important to make sure that you only take out debts that create value and can be seen as an investment.
Early Death
If the primary income earner in your home dies, your debt burden will greatly increase. If the amount of your debt exceeds the value of your estate, creditors can come back and claim your belongings to pay for your debt. High-interest debt is dangerous because it can live on, even after you die.
According to Murfreesboro Insurance Solutions, buying life insurance can help pay down debt and leave your family financially secure. Life insurance is exempt from creditors, so it guarantees that your family or beneficiaries will get money, even if the primary income earner in your home passes away.
Hurts Your Credit Score
High-interest debt can hurt your credit score in a number of ways. It can increase your credit utilization rate—the amount of your available revolving credit you’re using relative to your total credit limits. If you’re using more than 30% of your available credit in high-interest debt, your credit score will suffer. People who have the highest average credit scores try to keep their credit utilization rates in the single digits. You should aim to pay off your credit card balances in full every month. This will help improve your credit score and keep you on top of paying off your high-interest debt.
High-interest debt is incredibly dangerous. It can hurt your investment opportunities, hurt your loved ones, and hurt your credit score. If you have high interest debt or are having a hard time keeping track of all your debt payments, it may be a good idea to look into debt consolidation. Additionally, using a budget can help you make a plan for getting out of debt.
Having bad financial habits can negatively impact many areas of your life. We can help you to make a plan so you can achieve your financial goals! Contact us to get started.
