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Introduction - taking credit to fund a “have now, pay later” way of life
- is arguably not a problem in itself as long as you can afford to maintain
the required monthly repayments. In the UK today (July 04), the underlying
feeling of consumers seems to be one of confidence. There are now fewer
people out of work than at any time in the last 40 years, interest rates and
inflation are both low. In this environment the majority of people are able
to maintain their financial commitments. However, despite a seemingly successful economy, the
number of people seeking help with debt is on the increase. Numbers of
people with debt problems rose 12 per cent in February 2004 compared with
the same month last year (source CCCS May 04). Arguably therefore, the
rising level of consumer debt is a disaster waiting to happen. There only
needs to be a small change in personal circumstances and debt payments can no
longer be afforded. Such a situation turns into a disaster when the individual
has no buffer of savings to tied them through the bad times.
Causes of Debt
- if you find that you have a debt problem, you may feel extremely worried.
Many people also begin to question themselves unfairly saying to themselves “I
am a sensible person, how could I have let myself get into this situation?”
The fact is that you are not alone. Many thousands of people in the UK find
themselves struggling with debt every year. Some of the common
reasons why debts can become out of hand are given below.
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Loss of overtime -
Because it is so easy to obtain credit, many people find that they have
supplemented their lifestyle through personal loan and
Credit Card borrowing.
The repayments for this borrowing may have been no problem when overtime was
plentiful. However, in today’s job market, many employers are cutting overtime
or banning it all together. This can have a significant impact on the amount of
money people are able to bring home in their pay packet. When this starts, the
most common reaction is to struggle on (perhaps borrowing more from creditor
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. However, in today’s world it is usual for both male and
female partners to be working to support a certain standard of living. Very
often, a significant part of the household income is lost because of maternity
leave.
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Lower income due to divorce or separation
-
Very often while in a
relationship, one party will take on debt in the form of loans or credit cards.
The repayments of this do not seem a problem as there may be two household
incomes 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. This will then immediately be too much to cope with and problems start.
-
Financial difficulties due to ill health - If you find yourself off work due to ill health, it may very well be the
case that your income will fall. Your employer may make sickness payments,
however, you will loose additional income such as overtime. It may be possible
for you to claim on insurance policies associated with your loans. However, if
this is not the case, debts can quickly become out of hand.
-
Failed
Business -
Many sole traders
and small business owners may borrow to support their business activity. If
unfortunately the business fails, they often then find themselves personally
liable for these debts. It may be possible to find alternative employment,
however, the income gained from this may not be enough to support both household
expenditures and the debt repayments. The spiral of debt can then become started
unless proper action is taken.
continue to '
Frequently Asked Questions'....
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