Causes of Debt

There are many way that we can find ourselves getting into debt, most of them not through irresponsibility, but through changes in our life circumstances. Here are a few of the most common reasons:

Employment Changes

One of the most common causes of getting into financial difficulty is the loss of a job, or loss of bonuses or regular overtime. This is particularly true when people build their lifestyle around a particular level of income that turns out not to be secure, for example, buying a more expensive house based on possible future bonuses.

Marriage Break-Ups

The biggest cause of debt is the break-up of a marriage or partnership -� especially where there are children involved. Where once the two partners could share the cost of a house, a vehicle and all the other basics of life, suddenly both have to bear the full financial burden on their own, and may also need to contribute to help the other ex-partner out.

Change in Interest Rates

The general economic climate is a big source of debt problems. Rising interest rates are particularly dangerous to those who have already borrowed right up to their limit.

Rising interest rates also have an effect on property prices, as fewer people can afford to buy houses - first-time buyers cannot afford to take on mortgage payments, and existing homeowners cannot afford to move upwards in the housing market.

As a result, real estate prices stop rising, the economy generally slows down, leading to job losses and loss of overtime - which means there is even less money available to pay the mortgage.

Health Problems

Serious health problems, particularly mental health problems, are another major cause of financial difficulties. Hundreds of thousands of people in the US are unable to work through some sort of mental illness, and while mortgage protection insurance policies will offer cover for many illnesses, they exclude most forms of mental illness.

Spending Too Much

Even if everything else is going well, there will always be some people who get themselves into debt; it may be because they can't resist the urge to be generous, or they could be unable to resist the urge to shop. We all like to help people out, whether it's our children, grandchildren or our friends, but sometimes helping THEM out can get YOU into trouble.