3 Reasons You Can't Get Out of Debt

Do you feel as if you'll be in debt forever? Join the club. One survey found that 13% of Americans think they’ll never pay back all their loans, and another 8% say they won’t pay off what they owe until they're in their 70's.

Finding yourself buried in debt can be discouraging, but there's hope. We’ve rounded up three common reasons people can't get out of debt — and offer advice on how to turn things around.

Your Mortgage Is Too Big

The American Dream can turn into a nightmare if you take on a bigger mortgage than you can afford. Today, the average homeowner's mortgage makes up 69% of total household debt. If your mortgage is too much of a load for you to carry, you might need to find a roommate to help cover costs, downsize to a less expensive home, or rent instead of owning until you can save enough for a big downpayment.

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If your goal is to become mortgage-free as fast as possible, adding a little extra to your monthly payment is an easy way to get there. Let's say you have a 30-year, $200,000 mortgage with 25 years remaining and a 4.5% interest rate. By paying just $100 more per month toward your principal, you’d save nearly $21,000 in interest and be out of debt almost four years early.

Your Emergency Fund Is Too Small

A major health expense, surprise home repair or sudden job loss could deal a blow to anyone’s finances. Yet, only 38% of the people polled by Bankrate have enough cash on hand to cover such emergencies. Many people said they'd have to ask a family member or friend for the money or foot the bill with a credit card. Either way, you could end up drowning in debt if you have to borrow cash every time an unexpected expense surfaces.

That’s why it’s important to put away enough money to cover six months’ worth of living expenses. If that sounds like a lot, you don’t have to do it all at once. You can use a free service such as Digit to automatically set aside a little bit at a time. Once Digit is connected to your bank account, it analyzes your income and spending habits to determine how much you can afford to contribute to an emergency fund.

Your Interest Rates Are Too High

The higher your interest rates, the more you’ll have to pay to wipe out your debt — and possibly the more time it will take. Say you have a $10,000 balance on a credit card with a 15% annual percentage rate, which is typical these days. If you pay $225 a month, it will take 5 1/2 years and almost $4,700 in interest to pay off your debt. But if your APR is 11.6%, which is the average for low-rate cards, you’d be debt-free seven months faster and save more than $1,500 in interest.

Call your credit-card company to see if your rate can be lowered. If not, consider taking advantage of a 0% balance transfer offer from another credit-card company. A third option is to consolidate your high-interest credit-card debt into a lower-rate personal loan.

Take a look at seven more reasons you’ll never get out of debt to learn more.

Browne Taylor joined Kiplinger in 2011 and was a channel editor for Kiplinger.com covering living and family finance topics. She previously worked at the Washington Post as a Web producer in the Style section and prior to that covered the Jobs, Cars and Real Estate sections. She earned a BA in journalism from Howard University in Washington, D.C. She is Director of Member Services, at the National Association of Home Builders.