Carrying a lot of debt can have adverse consequences, such as a lower credit rating. For example, someone might have to deal with having to pay a higher deposit to have services, have higher insurance rates, and have a more challenging time renting or buying a home.

While most of us understand these consequences, there are also more universal ramifications. First, the economy as a whole can suffer due to bad debts. Second, what happens to the national debt if inflation takes off? Third, is there good debt as well as bad debt?

Credit Score

When a person has a good credit score, it is easier for them to invest or finance the purchase of a car or a home. On a national scale, this is also true. If a country has a good credit rating, other countries will be more likely to invest in that country. International trade will be more accessible, and the country’s citizens will find it easier to buy and sell goods.

Good and Bad Debt

In addition to credit, when looking at debt, one must realize that not all debt is created the same.

For example, there can be a big difference between taking on debt to buy a house vs. credit card debt. In the first case, the debt is backed by an asset in the form of a mortgage. 

Additionally, often people save money over the long term when a house is bought and their monthly payment is locked in. Whereas if they continue to rent, the amount they pay per month probably goes up each year. So, they could save a substantial amount by incurring the debt in the long run.

On the other hand, bad debt is debt that is not backed by any assets.

Inflation and Debt

While inflation has negative connotations, it can help pay off debt. For example, if someone owns a mortgage, the value of their debt will decrease due to inflation. Meanwhile, the person’s wages may be increasing, and their home value is also likely going up.

Taking on new debt in an inflationary time is a bad idea, but servicing existing debts is often easier. On a national scale, inflation makes it easier for the country to service its existing debt.

How to Improve Your Credit Rating

It can be challenging to improve your credit rating if you have bad credit. One of the easiest ways to raise your credit score is to have a credit card that you pay off quickly. Unfortunately, it is often hard to get a credit card if you have bad credit.

That is where Lantern Credit by SoFi has stated that “Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers.” Instead, it provides details on the best credit cards for bad credit. Even if you think your bad credit score won’t allow you to be approved for a credit card, several companies will provide you with a card, and some might even offer rewards or other benefits.

While it’s no fun for either an individual or the nation to have debt, there are ways, at least on a personal level, that you can cope with the situation. So it’s best to take a positive attitude and research options, as you can often do things to improve your finances!


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