The level of household indebtedness in most countries has been growing rapidly in recent decades, and the recent pandemic only emphasized this growth and the problem of household budget management, which can lead to over-indebtedness. Previous research shows that a low level of financial literacy can be the reason for excessive credit borrowing and difficulties in meeting credit obligations. However, apart from the importance of financial knowledge in managing personal finances, personal non-cognitive attributes represent an important framework for understanding how household financial decisions are made. Therefore, this paper investigates the impact of financial literacy as well as self-efficacy on household over-indebtedness in Croatia. The study employed a quantitative research design, using the snowball sampling method to recruit the participants. The results confirmed the significance of financial literacy for sound financial decisions as well as the influence of self-efficacy as a personal attribute in preventing over-indebtedness and as a determinant of household financial stability. Additionally, the analysis confirmed the importance of debt structure for household over-indebtedness.