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How Much Debt Is Too Much Debt?

How Much Debt Is Too Much Debt?

| October 22, 2015
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If you’re worried that you have too much debt, the good news is that debt isn’t always bad. Having debt—and paying it off—is beneficial for your credit score. Having a high credit score will make it easier for you to buy a house, a car, or get a bank loan. Without debt, you could never prove to creditors that you are trustworthy. 

Revolving Credit and Debt 

Your credit card functions on the principle of revolving debt; every month, you incur debt up to a certain limit, and then you are expected to pay off that amount.  Once you pay, your debt is reset to zero, and the process is repeated. Because every person will have a different limit on their card and different spending habits, how much debt is too much depends on the individual. 

If you are paying off all your debts on time, then you have nothing to worry about. Your credit score will steadily increase, and you'll put yourself on firmer financial footing. If you aren't paying your debts on time, it may be time to restructure your spending habits. Take a look at our Do I Have Too Much Debt? Calculator, which can help you determine if your spending habits are financially sound.  

Repaying Credit Card Debt

If you do have credit card debt, it may take some time to pay it off. Our Credit Card Repayment Calculator can help you determine exactly how long you’ll be paying off your credit card. Living under significant amounts of debt can be stressful, but creating a monthly payment goal is important if you hope to be free of debt.  

If you ever receive extra money, it is important not to automatically use it to pay off a portion of your debt. Your investment portfolio may offer returns on your investments greater than the amount of your debt. In this scenario, it is more beneficial to invest and earn money for the future. Our Debt or Invest? Calculator can help you decide which path is best. 

Questions? Get in touch today!

Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.

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