With the number of consumers in debt growing at an alarming rate, it is no surprise that there a lot of different reasons for getting into such a dilemma to begin with. The cause is usually much more complex than simply not having enough money to pay bills. The following are some common reasons that people get into debt:
Lack of income
Losing a job is one a very common reason why people lose track of bills and get into debt. Even when people receive money through other channels (alimony payments, unemployment compensation, structured settlement payments, etc.), it is usually not enough to take care of loans and credit card bills. The money is typically used for the bare necessities, such as food and housing. Some people eventually end up settling for a job with less pay. This can put financial stress on a household when you are still faced with the same expenses that you were paying before, but with a higher income.
A divorce can completely change someone’s life, including their finances. This is not only the case for the person that was financially dependent on the other, but also the spouse who may be faced with new expenditures, like alimony payments and/or child support payments. Furthermore, both parties may have to pay for lawyer fees, asset division, and other divorce-related costs that can be financially strenuous.
Relying too much on credit cards
Consumers get into debt when they fall behind on their mortgages, auto loan payments, student loans, and so on. However, the primary cause of debt is excessive credit card use. Making various purchases that you pay off quickly is one thing—depending on credit cards and continuously carrying a high balance is something completely different. Consumers who do this often find that the monthly payments can be too much to handle, particularly if they just make the minimum require payments each month and don’t make much of a dent in their principal.
Lack of savings
Losing a job, getting into an accident, or a death in the family are just a few examples of unexpected life situations that can take a toll on someone financially. Without enough money in savings, someone that experiences a sudden life change might turn to credit cards or risky loans in order to get the money they need to get by. If they already have loans, they might find that they are unable to make timely payments. Having an emergency fund is important, but because a lot of people don’t, this is another common reason that people get into debt.
Without health insurance, many people find themselves getting into debt when they need treatment for a sudden illness or accident. Even those with health coverage may find themselves facing considerable amounts of medical debt if they received treatment or services that their policy did not cover.
Being in debt doesn’t only hurt your credit score, but there are also serious consequences to consider. If you’re falling behind on mortgage payments, you risk losing your home to foreclosure. If you haven’t been paying your auto loan, your car can be repossessed. If you have unpaid debts that are not secured by assets, the creditor may be able to take out a judgment against you and garnish your wages.
If you’re in debt, and could use some extra cash to catch up on bills and expenses, Peachtree Financial Solutions may be able to help. If you’re receiving periodic payments from an annuity or structured settlement, we may be able to buy some or all of your future payments and offer you a lump sum payment. Imagine how much easier it can be to pay off your debt with a lump sum of cash. Contact Peachtree Financial Solutions today to learn more and to receive your free quote!
Nothing above is meant to provide financial, legal, or tax advice. You should meet with appropriate professionals for such services.