What’s Wrong with Paying Minimum Payments Towards Unsecured Debt?

Posted by Madison Newberg on September 9, 2025 at 5:30 AM

shutterstock_1739676296Unsecured DebtMany people who are dealing with debt often fall into the trap of only making the minimum payments on their debts. While making minimum payments keeps your account in good standing, it is important to understand the long-term effects of only making the minimum payments. There are several reasons why only making minimum payments can affect you long-term. 

First, the main issue is that a large portion of your payment goes towards the interest instead of reducing the principal balance. Minimum payments are designed to maximize the interest you'll pay while keeping you technically current on your obligations. This means your debt grows over time and you end up paying significantly more than your original purchases were worth. 

Minimum payments also stretch out your debt timeline. When most of your payment goes toward interest, it can take a long time to reduce the principal balance. This means you’re not actually significantly reducing your debt each month. It could take years, even decades to pay off your debts if you are only making minimum payments. 

Further, your credit utilization remains high. This is the percentage of your available credit that you are using. When you make minimum payments your balance decreases slowly, keeping your utilization high. This can lower your credit score

Finally, making minimum payments can delay your financial goals. It increases money spent on interest and could lower your credit score. Every dollar spent on interest is a dollar that you don’t get to use to build an emergency fund, save for a down payment on a home, or invest in retirement accounts. 

For these reasons,  filing a bankruptcy could be your best option. Filing a chapter 7 bankruptcy can wipe out most, if not all of your debt in roughly 90 days. Filing a bankruptcy is often the fastest way to get a financial fresh start. Filing a bankruptcy can put you in a better position to meet your financial goals. Speak with a bankruptcy attorney to see how filing a bankruptcy can benefit you. 

 

CALL NOW FOR A FREE STRATEGY SESSION FROM AN MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM

If you are dealing with an overwhelming debt problem, it is important to discuss your options with a bankruptcy attorney. If you have questions about bankruptcy and would like to do a free consultation to go over your options, visit www.lifebacklaw.com to speak with an attorney. You will be glad you did! 

 

Topics: Why is paying the minimum payment bad?, What happens if I can't pay my unsecured debt?

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