There are many reasons why people fall into debt, and never get out of it.
- Some debtors have acted irresponsibly by simply borrowing more than they can afford to repay. Others have suffered from over-lending by banks and other lenders.
- Some debtors have borrowed more reasonably, but have then suffered from a change in circumstances making what was once affordable no longer affordable. Such as: Sickness, Redundancy, breakdown of a relationship or divorce, Birth of a child.
Whatever the cause of your debt problem, when we are suddenly faced with insurmountable debt repayments, we often try to recoup our losses by further borrowing; through personal debt consolidation loan or secured loans, car financing or mortgages.
This is often referred to as the vicious cycle of debt. Your first rule should be, ‘when in a hole, stop digging!’. This means that borrowing more money is rarely the answer. This applies to both personal unsecured and secured loans. Always seek professional expert advice before considering further borrowings.
Very often, we find callers need help to decide whether an Individual Voluntary Arrangement would suit their finances and lifestyle. No matter the need, we try to advise the public and help them compare debt solutions.
What causes debt?
According to the Bank of England consumer debt has reached £1.44 trillion.Of this, unsecured debt reached £230 billion. Where a household has unsecured debt the average is £21,450.
Irresponsibility is a big cause, though most certainly not the only one. Debt is a complex issue, and it is hard to determine why people are over-indebted, though some of the blame goes to circumstances beyond their control. This could be anything from an unplanned birth, sickness, or even the loss of a job. Being in debt can be a horrible experience: self-esteem, loss of assets and the constant worry over how to cope with it all. Many relationships have suffered; some have even disintegrated due to the problems caused by having too much debt.
- Thinking debt will disappear if it is ignored
- Failing to budget, or not knowing how to budget.
- Being unrealistic about the basic needs such as food, fuel costs, and clothing.
- Thinking creditors will not offer help when you’re in difficulty. It’s often as easy as talking to them and explaining you’re in a tight spot. If they are a reputable lender, they will be willing to give you some time to recover.
- Thinking that you can borrow more money to pay off existing debts. This may reduce your monthly repayments in the short term, but your debt level has increased and your problem has actually often been made worse.
- Debt from loss of work.
- Failure of a small business.
- Divorce, separation or the breakdown of a marriage could be a big cause.
- Bad health can cause such panic in someone’s life, they may forget about all but the most important thing: getting healthy.
- Gambling can cause plenty of problems on its own, so imagine what it can mean to someone with debt problems.
- Many people have problems with taxes.
- Defaulting on agreements with creditors. Ignoring letters, reminders or default notices is a bad idea.
- Failing to attend court hearings.
- Debt due to credit card debt, store card debt, mail order debt. Sometimes it is all too easy to borrow more money that we fall into the trap of not recognising that it all needs to be repaid. A simple tip is to think of credit as debt. You may want to borrow more credit but you can never get it. What you get is debt.
- Debt from secured loans or personal loans.
- When there is a death in the family, often the funeral arrangements take first priority. This might mean bills get ignored due to grief and responsibilities.
- Mortgage and rent payments should be made a priority. Forgetting to do this is one of the bigger causes of debt, as well as an almost guaranteed way to lose one’s home.
- Being a single parent is difficult. Add to this being the only provider and it might not be surprising that many single parents have debt problems.