Long & Short Term Effects of Debt


When you accumulate a large amount of debt, it can be a very discouraging time in your financial life. Eliminating the debt should be one of your top priorities because of the consequences to which such a large amount of debt can lead. Having too much debt can hurt you in the long-term and in the immediate future.

Credit Score Damage

  • In the short term, having too much debt can lower your credit score significantly. One of the most important factors the credit bureaus look at when calculating your score is the credit utilization ratio. This means that they look at how much credit you have available in relation to the amount of credit that has been given to you. If you have a high ratio, your score will fall quickly. You may not be able to get your score back up until you pay down the balances.


  • Another short-term consequence of having too much debt is that you may not be able to get financing. If you need to get a loan for a mortgage or a car, you may not be approved because of your large amount of debt. Lenders typically do not like to work with individuals who have large amounts of debt in relation to how much available credit they have.


  • If you cannot afford to repay your debt, your creditors may come after you and file a lawsuit against you. It typically takes some time before the creditor goes to these lengths. Once a lawsuit is filed against you, the court can issue a judgment against you, which can lead to several circumstances. The creditor may garnish your wages or levy your bank account. This could force you to miss out on part of your paycheck for several years.

Paying Off Debt

  • Another long-term consequence of accumulating a large amount of debt is that it can take years to pay it off. Many people run into problems when they rack up large credit card balances. Credit cards typically carry with them very high interest rates, which make it difficult to make any progress on paying them off. If you only make small payments on your credit cards each month, it may take you more than 20 years to pay them off.

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