Common reasons why consumers get in debt, continued

Category: Debt

Customer in retail store paying cashier with gift card

With so many consumers falling deep into debt, it is no surprise that there are so many different reasons that eventually result in someone being far behind on their bills. Although every consumer’s situation is unique, the following are some of the most common reasons that people throughout the country get into debt:

Divorce

Life changes completely for a couple once they divorce—finances included. Whether your spouse was the breadwinner and you don’t have a steady income, you lose assets after the divorce finalizes, or you have been ordered to pay child support and/or alimony, there’s a good chance that your finances will drastically change following a divorce. For some people, these financial changes can leave them unable to catch up on unpaid bills, and is often a common cause for getting into debt.

Relying too much on credit cards

Falling behind on any type of loan—whether it’s a mortgage, student loan, or car loan—can cause someone to get deep into debt. But excessive credit card use remains the biggest cause of consumer debt, and while responsible credit card use can be a good way to build up credit, falling behind on credit card bills can easily result in debt for years to come. Many consumers depend on credit cards just to take care of everyday essentials, or even to pay other bills. The problem is when it’s time to pay that credit card bill, a lot of consumers will just pay the minimum payment or miss the deadline completely, and still keep charging on the credit card until it is maxed out. It can be difficult to break this cycle, but the first step is to stop charging, even if you have available credit. Next, you want to try to pay more than the minimum payment. Although making minimum payments will stop you from defaulting, it won’t do any good for your credit score and it will keep you in debt. Minimum payments will barely make a dent in your principal balance, especially if you have a high interest rate, so you’ll barely see your debt go anywhere. Even if you can just pay a little bit more than your minimum payments, you’ll eventually see that money go somewhere and your balances will begin to go down, especially if you don’t make any additional charges.

Medical expenses

Many people—particularly those who don’t have healthcare coverage—get into debt when they get sick or have an accident. Unable to pay for these medical costs, they receive bills for the charges, and many people are unable to pay them. It’s not uncommon for medical expenses to run into the thousands, especially if a hospital stay is required. Even with an emergency fund and steady income, it can be easy to get into debt this way. If you don’t receive health insurance through your job or you’re currently unemployed, you may want to look into purchasing your own plan so that you can avoid getting into medical debt.

Have you fallen behind on bills and need extra cash to get out of debt? Peachtree Financial Solutions can help if you’re receiving long-term annuity payments. By selling all or a portion of your future annuity payments, you can receive your money sooner and in one lump sum. Contact Peachtree Financial Solutions today to learn more about selling future payments and to receive your free quote!

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Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.

Tags: Budgeting, Credit Cards, divorce, Emergency Fund, medical expenses

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