Why are you in Debt?
Getting into debt can be extremely worrying, especially if you're usually cautious with your finances. The first thing to realise is that you aren't necessarily to blame. Debt can happen to literally anyone at any time. Job loss, illness, interest rate rises, hefty household bills. it only takes an unexpected change of circumstance or a large bill and you can easily tip into the red.
You are not alone
Many thousands of people in the UK find themselves struggling with debt every year. We've listed some of the most common reasons why debts can get out of hand below:
Loss of overtime
Because it is so easy to obtain credit, many people find that they've supplemented their lifestyle through personal loan and credit card borrowing.
Repayments may have been no problem when overtime was plentiful. However in today's market, many employers are cutting down on overtime or banning it all together. The result can mean a significant drop in income. The most common reaction is to struggle on (perhaps borrowing on credit cards to make a loan payment) in the hope that times will get better and overtime will be re-instated. This is not the answer!
Pregnancy
The birth of a new child is a wonderful experience. And these days it's usual for both partners to be able to carry on working to support their standard of living. However a significant part of the household income can be lost due to maternity leave. The normal reaction is to increase borrowing to try to make up for this. But even if both partners return to work, it can be extremely difficult to support both the additional borrowing AND the additional expense of the baby. The result? Debt problems then start to mount and spiral out of control.
Divorce or separation
Often in a relationship, one partner takes on debt in the form of loans or credit cards. On two incomes, repayments may not seem a problem and the burden of the household expenditures can be shared. However if the relationship breaks down, one party may be left carrying the burden of the debt. It's when this can become too much to cope with that problems start.
Financial difficulties due to ill health
If you suddenly find yourself having to take time off work due to ill health, your income may fall. Your employer may make sickness payments, however you will lose additional income such as overtime. You may be able to claim on insurance policies associated with your loans. But if you can't, debts can quickly become out of hand.
Failed Business
Many sole traders and small business owners may borrow to support their business activity. But if your business fails, you may find yourself personally liable for these debts. Of course you may be able to find alternative employment, but your new income may not cover both your household expenditure and the debt repayments. As a result debt can start to spiral unless prompt action is taken.
