Which Types of Debt Affect Your Quality of Life the Most?

by Lyle Daly | Updated July 21, 2021 - First published on Oct. 11, 2019

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We've surveyed consumers to find out which are the most stressful debts.

While it's true that any debt can make life more challenging, not all types of debt are equal in this regard. Certain debts can have a huge impact on your stress levels, whereas others barely register.

In our study on the psychological cost of debt, we found that on average, 70% of consumers with debt expressed satisfaction with their lives, compared to 83% of those without debt. But we also discovered that this percentage changes depending on the type of debt a consumer has.

Based on that information, here's where each type of debt ranks based on how it affects your quality of life.

1. Medical debt

Only 64% of those with medical debt were satisfied with their lives, making it the most stressful type of debt by a wide margin.

One reason behind that is because medical debt is often the result of a health problem, which is already stressful in itself. Each time you see your bill, it can be a painful reminder of what you went through.

As anyone who has gotten a doctor's or hospital's bill can attest to, medical costs are also expensive, and you're usually not given a whole lot of time before you're expected to pay in full (although you may be able to set up a payment plan). That can make medical debt uniquely difficult to pay back. In fact, 42% of consumers with medical debt pay less than the minimum payment amount.

2. Credit card and personal loan debt

Third place is a tie, as 75% of both the consumers with credit card debt and with personal loans reported satisfaction with life.

It's rarer for consumers with these types of debt to have trouble making their payments. Only 8% with credit card debt and 9% with personal loan debt pay less than the minimum. That's still a problem, but those rates are much lower than they are with medical debt. Just keep in mind that unlike with other types of debt, only making minimum payments on credit card debt is always a bad idea due to the time it will take to pay off everything in full.

These debts can become more stressful as your balances grow, so it's important to not let that happen. This is especially true with credit card debt, which is notoriously difficult to pay down due to the interest rates and the fact that you can keep using your credit card until you've hit your credit limit.

3. Auto loan debt

At this point, we've reached the debt that typically doesn't have a huge impact on your quality of life. Approximately 82% of those with auto loan debt were satisfied with life, only 1% lower than the satisfaction rate among consumers who had no debt at all.

Auto loans often have low interest rates, and since you get a car out of the deal, they're easier to stomach than other types of loans. You also have control over how much you borrow and you'll know your monthly payment amount upfront, two things that can help you ensure that your auto loan fits in your budget.

You do need to be careful that you buy a car you can afford and don't end up with a loan that takes you longer than four or five years to pay off. That's why one of the most valuable pieces of advice for financing a car is to look at the total loan amount and the term length. Salesmen can almost always get you a low car payment by extending the term of the loan, so you never want to base your decision on the monthly payment amount alone.

4. Mortgage debt

Of consumers with mortgages, 86% expressed satisfaction with their lives, so you could say it's actually more stressful not to have a mortgage.

Mortgages are a serious commitment, given that they typically last from 15 to 30 years, but they also offer some of the lowest interest rates of any type of loan. And the money you pay will be going toward an asset that should increase in value, at least over the long term.

Although there are times when having a mortgage is challenging, for the most part, it's outweighed by the happiness you get from being a homeowner and having a place to call your own.

Don't let debt weigh you down

So what can you do to keep debt from impacting your quality of life?

The first step is to do your best to avoid the more stressful types of debt. Track your spending so you don't run up credit card debt or find yourself in need of a personal loan. Make sure you have good health insurance and an emergency fund so you can hopefully avoid going into medical debt. If you currently have debt that's weighing you down, then you should evaluate why it's affecting you that way. Are you struggling to make your minimum payments? Are you worried about the amount of time you'll be paying back what you owe? Once you've pinpointed the reason why you're stressed, you can look at repayment strategies so you can become debt-free as quickly as possible.

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