In a true "illusion vs. reality" paradigm, the answers to this question will vary, so be prepared to have to sift through different and, sometimes, competing ideas in order to find your own notion of the "truth." I think that the more conventional answers exist in the second part of the question. Illusions can have different negative effects on an individual's life. In the most cosmic of senses, one negative effect that an illusion has on an individual is that it compels them to worship that which is not "real." We can engage in an entire debate longer than the space in enotes to a discussion about what is real. Yet, when accepting the premise of an illusion, the individual accepts that which is not real as a substitute for reality. For example, the illusion of the "perfect body" drives individuals to embrace unhealthy approaches to being in the world that damage the psyche and could end one's life. The illusion of striving for the "perfect body" is reflective of the danger within illusions. A similar example can be found in drug addiction. Those who are addicted to drugs believe in the illusion of narcotic use. Psychological illusions such as the need for the drug to help provide a sense of control in one's life or in the sustainable "perfect high" or physical illusions such as the body has to have the drug are examples of addiction's illusory quality. The negative effects of such an addiction are evident in how a human being in both soul and body deteriorates in pursuit of an illusion.
Another negative effect of the illusion is that it provides an arbitrary vision of totality and unity without embracing the complexities of being in the world. The definition of the word helps to illuminate its negative effect: "an instance of a wrong or misinterpreted perception of a sensory experience." The person who holds an illusion dear is embracing something distorted or misinterpreted. There is a very good chance that what is being embraced or valued presents a unified notion of being in the world. Similar to mirages in the desert, the illusion enables an individual to believe convergence and totality in consciousness when it might not be evident. In order to embrace the illusion, reality is discarded. The discarded reality is most likely complex, intricate, and filled with challenging entities, thereby making the illusion more desirable. For example, if I am in a relationship with someone who abuses and denigrates me and I don't want to confront them about it, I retreat to the illusion that "Everything will be fine" or "Things will work out" or "They are just having a bad day." Each statement is an illusion, a simplistic reduction of a complex entity. Confrontation and change are challenging elements and to avoid such reality, the illusion is embraced. This has a negative effect on one's life because it perpetuates suffering and anguish in the name of a hopeful evasion of the challenges in being.
Since the topic of the question is in "literature," one of the best examples from a literary point of view regarding the destructive effect of illusions can be seen in Flaubert's Madame Bovary. Emma Bovary is frustrated with her reality and with the life she leads. She embraces the illusions brought on by class advancement, materialism, and romanticism in order to evade the harsh truth of the reality that governs her. The illusion of the garden prevents Emma from seeing the desert in which she lives. Avoiding the painful challenge of accepting the condition of the world in which she lives is what drives her to embrace illusions that are not sustainable anywhere except in her subjective. The suffering that Emma puts herself, Charles, and her child through are examples of the negative effects that illusions have on an individual
If there is one positive aspect to an illusion, I would say that it lies in the restorative aspect of life after illusions. If an individual comes to the realization that they have pursued an illusion and recognizes its destructive tendencies, there can be a sense of restoration which takes place within the individual. This restoration includes acknowledgement of the illusion and a hopeful vigilance against it in the future. Being able to speak to a life after illusions and a reality in which one acknowledges complexity and intricacy without fleeing from it is a positive force in consciousness. Individuals who are able to emerge from illusions with a new sense of reality within them can be stronger agents of action. The ability to end illusions in recreating a new consciousness where reality is accepted and embraced can be seen as a positive aspect within the embrace of illusions.