The average consumer debt has today reached the staggering amount of approximately £15000. If one takes stock of the total amount of consumer credit, not counting mortgages, it comes to an unbelievable 150 billion pounds. In just 3 decades the numbers have shot up by almost 3 times.
But what is the reason behind this? One can safely say that there are many factors that play a role here. Irresponsibility is just one of them and not the primary factor as one might assume.Sudden changes in financial position, unemployment, medical problems all contribute to debt, which can have an overwhelming and demoralizing effect. In fact, it can break homes, threaten identities, make a person anti social and cause tremendous psychological agony.
Here are some causes of debt:
Hiding your financial distress from creditors.
If your financial difficulties are genuine and you are able to convey this, most creditors will take a reasonable stand. Problems start only when you try to hide things from lenders.
Repaying debts with borrowed money.
This is a delaying tactic. It just puts off dealing with the problem. You are just taking on another debt to pay off an existing one.
Living beyond your means.
You will fall straight into the debt trap if you spend more than you earn. If you face a sudden cut in income then make sure than your expenses are also reduced accordingly. Otherwise, to maintain your standards, the credit card may get used more for essential items. Without realizing you will end up with a substantial credit card debt.
No savings.
The ideal situation would be to have enough savings to see you through 4-6 months of unemployment. So start saving now for a better tomorrow. This way you avoid taking a loan or using your credit card.
No supervision on expenses.
Many people have no idea how to manage their money. They do not budget their expenses nor do they keep an eye on bills. They spend their money and at the end of the month have no idea where it has gone. In such cases, often people tend to turn to their credit cards when money falls short. This hikes up the interest rates.
Health care expenses.
Medical bills are a major part of an individual’s expenses. Now, with most physicians and clinics accepting credit cards, it is easier to incur these expenses even if one does not have ready cash. But you have to repay the amount to the credit company one day.