What Is Debt Overhang?
A Debt Overhang happens in a household when the household spending is significantly greater than the household income. It is up to the point that the household can’t already take on additional debt to finance other expenses. Household debts consist of the debts of all members of a household. It includes consumer debt, mortgage loans, home equity loans, auto loans, student loans, and credit cards.
Debt overhang is certainly a liability. The effect of this is that you can’t buy even the most important things. It serves to prevent current investment since all of your income would all go to your existing household debt leaving you only with just a small incentive that will make it so hard for you to recover from your difficult situation.Continue reading