People usually consider extensive personal debt to be a financial problem. In fact, while the primary effect of personal debt is financial, its side effects are equally distressing. Often, the problems of debt can go well past having to skimp and save on various purchases, but can take a personal toll on the debtor and his family.
One of the main emotional effects of personal debt is stress. Debt weighs on the debtor like a burden, something that constantly follows him and presses down on him. The work that must go into making sure debts are paid off, including the sacrifices the debtor is forced to make, can result in lost sleep and lost hair.
If a person owes a significant amount of money to another party, the creditor may attempt to receive payment by initiating a court order for wage garnishment. When wages are garnished, the debtor's employer withholds money from each paycheck.
This is not only embarrassing, but can potentially cost the debtor his job. While under the Consumer Credit Protection Act, an employer is not allowed to fire an employee because he receives a single garnishment, he can fire him for receiving multiple garnishments.
With excessive debt in a household usually comes some assignment of blame. If one spouse in a relationship was responsible for incurring most of the debt, the other spouse may feel angry or frustrated toward the other. This can spark arguments that, if the debt continues, are not always easily resolved. In many cases, this can act as a catalyst for divorce.
Inability to Purchase a Home
If payments on debt are late, the debtor's credit rating is negatively affected. If the debtor's credit score drops too low, he may be unable to obtain loans at a reasonable rate of interest. This may prohibit the debtor from obtaining a mortgage to purchase a home, confining his family to rental units.
When debts pile up, debtors often must shift their financial resources away from some expenses in order to pay back the debt. Often, this can mean the rent on a residence goes unpaid, resulting in an eviction. Not only does this force the debtor to find new accommodations, but the eviction may show up on his credit report, further lowering his score.