Can you be addicted to debt?
It is not uncommon to have financial problems from time to time, but if you are locked in a never-ending cycle of debt, you may be addicted to debt. More than just a shopping addiction, debt addiction is a crutch that addicts use to cope with financial and personal problems without thinking about changing their lifestyles or getting out of debt. While over-indebtedness can often be caused by a myriad of issues from external economic factors to personal family finance needs, for some people it can be due to a genuine addiction.
As with drug addiction, debt addiction affects people from all walks of life and strikes everyone regardless of their income or background. Also, like any other addiction it is often characterized by needing something so powerfully that it overwhelms rational thought. It is often fueled by an as irrational need to finance a lifestyle that you know cannot really afford.
This type of way of life however is unsustainable. At first, debt addicts will make the minimum payments to avoid going into collections and to keep accounts current. However, due to the fact that borrowers of this nature represent an increased lending risk to lenders, each new account usually carries a higher interest rate and stricter repayment terms. As the problem becomes more severe, we commonly see them using credit cards to repay debts and ultimately going bankrupt.
- The first step to turning the situation around is recognizing and admitting to the addiction. Let’s unpack some of the signs that indicate that you may be addicted to debt.
When it comes to credit cards, you always pay the minimum. Most credit card companies allow their customers to pay a small percentage of their debt each month. The goal of this strategy is to allow you to borrow money for the longest possible period of time, in order to pay the maximum amount in interest.
- You juggle your credit card balances to sustain your increasing debt. Many credit card companies encourage this behavior by offering special balance transfer rates. Balance transfers are an excellent way of reducing your interest rate, but they should be part of a strategy to pay down debt, not to maintain it.
- You survive on revolving loans. Taking out loans temporarily is fine; however, if borrowing becomes a permanent feature of your lifestyle, you are probably now a debt addict.
- Whenever you take out a loan, you always take the maximum term. Choosing the longest term may lead to a lower monthly payment, but you’ll also pay more interest over the loan’s life. You can control your borrowing by selecting shorter-term on loans.
- Your loan extends past the lifespan of your purchase. Houses and cars are assets you’ll use for many years to come, so it makes sense to take years to pay them off. On the contrary, the more borrowing you do, whether for vacations or consumer electronics that don’t last, the more unsustainable your lifestyle becomes.
Debt addiction is very possible, and it can happen to everyone, however there is no need to be ashamed of it because millions of people all over the world also go through it. Also, when you recognize the problem, you are well on your way to recovery. National Debt Advisors has assisted hundreds of thousands of people effectively resolve their debt issues. Reach out to us and we can help you find the right solution for your debt problem.