Loading the player...

What is 'Debt Fatigue'

Debt fatigue occurs when a debtor becomes overwhelmed by the amount of debt incurred and the seeming futility of the debt repayment process, and it may result in a debtor giving up on making loan payments and beginning to overspend again.

BREAKING DOWN 'Debt Fatigue'

Debt fatigue can happen when a large portion of payments go toward interest and the overall amount of debt owed does not appear to dramatically lessen as payments are made. Be it from student loans, mortgage payments or credit card bills, working to pay off debt can feel like an impossible obstacle to overcome. Experiencing debt fatigue may eventually cause a debtor to declare bankruptcy as a last-ditch effort to resolve the situation.

Debt fatigue may cause a debtor to feel depressed, burned out and hopeless about the debt repayment process. Because it can often take years or even decades for debtors to repay their loans, it is easy to hit a wall, especially if a debtor has already made significant cutbacks to their lifestyle and spending habits to stay on track. One of the worst and most immediate effects of debt fatigue is that the debtor may start to overspend and incur more debt again. Increasing the debt load will not help a debtor's financial situation and is likely to drive the debtor to insolvency.

To make debt fatigue less likely to occur, a debtor should make efforts to stop incurring additional debt and make a realistic repayment plan that allows the debt to be fully repaid as soon as possible. By not dragging the debt out for any longer than necessary, the debtor will start seeing more dramatic results of the debt repayments sooner, preventing them from becoming overwhelmed by the overall debt burden.

How to Combat Debt Fatigue

Overcoming debt fatigue requires planning, persistence and endurance. Those facing large debts should create a strategy for beating it as soon as possible, such as the debt avalanche and debt snowball methods. Because debt often feels like it will last forever, a debtor should focus on the reasons they want to be out of debt and their goals for life after debt. It can also be helpful for a debtor to set small goals and budget to allow themselves a small reward, like dinner out or a movie with friends, whenever they reach a milestone. Because owing large debts is extremely common, if a debtor has friends and family in a similar debt situation, they might consider banding together to help each other remain accountable.

RELATED TERMS
  1. Debtor

    A debtor is a company or individual who owes money also often ...
  2. Debt Snowball

    A strategy for paying off outstanding balances, the debt snowball ...
  3. Debt Assignment

    Debt assignment is a transfer of debt, and all the associated ...
  4. Debtor in Possession (DIP)

    A debtor in possession (DIP) is a person or corporation that ...
  5. Debtor Nation

    A nation with a cumulative balance of payments deficit. A debtor ...
  6. Collection-Proof

    Collection proof is a word used to describe a person that has ...
Related Articles
  1. Investing

    Will Corporate Debt Drag Your Stock Down?

    Corporate debt can mean a leg up for firms, or the boot for investors. How to tell the difference.
  2. Personal Finance

    Best 5 Money-Saving Tips to Get out of Debt

    Understand the different types of debt and the reasons why people get into debt. Learn about five tips to follow to get out of debt.
  3. Personal Finance

    Why Debt Isn’t Always a Bad Thing

    When managed properly, debt can be used to achieve a higher overall rate of return.
  4. Personal Finance

    Debt Settlement Arrangements And Your Credit Score

    The debt settlement process is not for everyone and can further damage your credit score. However, it can prevent the debt from being sold to a collection agency, who may only accept payment ...
  5. Personal Finance

    How the debt collection agency business works

    Understanding how the debt collection business works will give you a better chance of coming out ahead if you ever have to tangle with a collection agent.
  6. Insights

    How Debt Limits A Country's Options

    While debt is fundamentally necessary to the operation of a national government, it can also be limiting and dangerous.
  7. Investing

    Debt Ratio

    The debt ratio divides a company’s total debt by its total assets to tell us how highly leveraged a company is—in other words, how much of its assets are financed by debt. The debt component ...
  8. Personal Finance

    What Millennials Should Know About Good and Bad Debt

    Can you tell the difference between good and bad debt?
  9. Personal Finance

    The Best 3 Debt Consolidation Loans Companies in 2016

    If you're looking for debt consolidation, these are three companies to consider.
RELATED FAQS
  1. Why would you look at a company's net debt rather than its gross debt?

    Learn the difference between net debt and gross debt, how to calculate debt using a company's financial statements and why ... Read Answer >>
  2. What are the main categories of debt?

    Learn about the different types of debt available for consumers including secured debt, unsecured debt, revolving debt and ... Read Answer >>
Trading Center