Debt Fatigue

Debt Fatigue

This financial term describes a scenario common to both consumer borrowers and commercial borrowers alike. For many, it is the beginning of a downward spiral, and can result in poor borrowing decisions and overspending if not assessed and corrected in time. Let’s examine the specific definition and some ways to help prevent debt fatigue from disrupting your financial success.

Debt Fatigue (n.)

  1. When a borrower discontinues payments on their debts and begins to spend even after they have become overwhelmed by the sums owed.
  2. A sense of futility regarding debt repayment as a process when payments on debts do not appear to significantly reduce the amount owed even as regular payments are made
  3. Debt fatigue can lead to declarations of bankruptcy as a last-resort attempt to eliminate debt fatigue.

Here’s how a debt fatigue spiral typically runs its course: a debtor starts overspending and incurs even more debt again because of their current level of debt seems to be overwhelming. The increased financial burden of additional debt only exacerbates their financial situation and in many cases drives a business towards insolvency. So, because they’re in debt and feeling overwhelmed, they overspend and borrow more, increasing their sense of financial distress, and in turn increasing their overall debt fatigue.

What’s the solution to breaking out of this cycle? Stop incurring additional debt. Stop it right away, sit down with your financials personnel or department, and hammer out a payment plan that will accelerate your repayment of your debts ahead of schedule. The primary trigger for debt fatigue is extended repayment, so the easiest way to prevent or eliminate debt fatigue is to pay those debts off sooner than originally scheduled. Early repayment goes a long way to maintaining a positive outlook regarding debts, and significantly reduces the likelihood that a business or individual will become overwhelmed by their outstanding debt.

If you believe that you are presently in a cycle of debt fatigue, the most important thing you can do for yourself or your business is to stop borrowing money right away. Rework your budget immediately, and focus on one debt at a time for accelerated payoff. You may have to forgo some personal luxuries or trim the fat here and there from your budget, but in the long run it will help you regain a sense of control over your finances and maintain your long term creditworthiness.

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