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From Editor’s Desk: This is a guest article by Sam Butterworth
Unfortunately living in debt is not uncommon these days and this problem is rather widespread. Debt is no new phenomenon though and throughout history people have exceeded their means and had to borrow a few extra shekels or shillings. Today credit is more available than ever with credit cards, store cards and retail repayments schemes all easily available to most people.
You may well have used these means of securing funds or making purchases before, and of course you will be aware that at some point your creditors will want you to make repayments. This is where some people find themselves in trouble.
What are the major causes of debt?
The ease of access to credit today is one of the main causes of debt, or at least the biggest factor that allows people to get themselves into debt. Credit is usually taken to make large purchases such as cars or to contribute to buying a house, or perhaps to pay for a holiday. The intention is usually to repay these funds as soon as possible, but sometimes this doesn’t happen and debt can mount.
Common problems caused by debt
Debt can cause numerous problems, both financially and personally and whether you are in debt or not you should be aware of them.
– Financial problems – if you fall into debt is it very easy to end up with a bad credit rating, which could affect future borrowing and cause problems trying to get a mortgage or other loans. You could also find yourself without the funds needed to make monthly repayments and find yourself in a cycle of borrowing, where debt continues to increase.
– Personal problems – if you’re in debt it is very common for you to feel stressed, anxious and even depressed and this can consequently affect personal relationships with family and friends.
What are your options for dealing with debt?
Thankfully there are a number of options for dealing with debt, so if you are in a financial black hole, it is important to know that escape is possible. Possible solutions to debt problems include the following:
– Bankruptcy – this is a way to write of debt accrued, though it is usually only used as a last resort. Your possessions and home may be used to pay your debts, it can affect employment and prevent you from borrowing any money over £500 without telling your lender that you’re bankrupt.
– IVA – an IVA or Individual Voluntary Arrangement is a way to write off a portion of outstanding debt. This involves an insolvency practitioner coming to an agreement with your creditors, allowing you to pay a reduced amount to settle your debts. As with bankruptcy there are drawbacks to an IVA and it will seriously affect your credit rating, making it difficult to get loans, buy on credit and open new accounts.
– Consolidation loan – Consolidation loans are popular alternatives to the above options and could allow you – if you’re struggling to make monthly repayments – to do away with multiple monthly payments and replace them with one lower monthly payment. This is a method of moving away from debt that is chosen by many people and it might be the right choice for you. However, if opting for a secured loan to consolidate debt, it should be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
The important thing to remember is that if you are in debt there are a number of ways to deal with it, and to move forward towards financial liberation.
About the author: Sam Butterworth writes for Nemo Personal Finance, who may be able to help you if you’re struggling with debt. They offer debt consolidation loans and other options to help you deal with debt.
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