The causes of debt

If you are asking yourself this question “I am a sensible person, how could I have let myself get into this situation of massive outstanding debt?” probably you are being unfair. There are hundreds of thousands of Citizens in the UK who are facing the same problem.

According to social policy team the average debt of a consumer is approximately £15000. The total amount of consumer credit excluding mortgages stands at 150 billion pounds. This amount was three times higher than the total amount nearly ten years ago.

Debt can literally ruin people’s lives. It makes them feel embarrassed, guilty, disturbed and angry. Debt also affects their mental as well as physical health due to immense constant pressure and stress. It can ruin your business, your marriage and even break your family.

The most commonly assumed reason for debt is the irresponsibility of the Debtor, however, it is not true in most of the cases. There are countless diverse reasons for debts. The rest of the guide describes some of these major causes with their potential remedies.

Loss of employment

The recession in the economy (2007-2009) has made many people jobless. This qualifies for one of the top reasons for bad debts. The situation becomes even worse if there is only one person in the household who is the breadwinner.
In such a scenario an emergency fund is indispensable.

Divorce or marriage breakdown

This is also one of the major causes of debt for many individuals. Divorce or marriage breakdown is one of the few life-changing events that have an extreme impact on your financial situation.
You should seek professional help to cope with the situation.

Living outside of your means

Most of the people do not formulate a monthly budget, some who do, forget about the occasional items such as school expenses, Christmas and so on. In both the cases you may have to obtain a loan to manage the expenditures.

You must work out a budget and calculate how much disposable income you have every month. You can either save this amount or spend it on the occasional items mentioned earlier.

Avoiding Court and Creditors

Many people try to avoid the Court and the Creditors. This may delay the problem for some time, but at the end of the day you will find yourself in a deeper mess.

It is always good to stay in touch with your Creditors and inform them about your fiscal status. Many reputable Creditors will be reasonable towards you if you take them in confidence.

Medical problems

Bad health and medical emergencies can amplify your debts faster than any other reason. You cannot stop such emergencies from happening.

Your only solution is always to try and save some amount for emergency and prepare yourself.

Relying on your Credit Cards or Store Cards

Swiping a plastic card is a lot easier than handing over your hard-earned cash. Credit Cards are no doubt handy, safer and provide extra convenience. But everything comes at a cost. You do not realize how much you are paying if you overuse your Credit Card until the end of the month.

Interest and penalties can boost your Credit Card debt in a matter of months. Using hard cash can solve this problem or restrict your Credit Card usage as less as possible.

Not saving

People who do not save any money on monthly basis find themselves in an intense nuisance, especially, in case of an emergency. If you save even a small amount every month, you can cope with many other causes of debts with this small effort.

Cut down your unnecessary expenditures and save for tomorrow.

Failed business

This is the most unfortunate scenario. Especially in case of small business, you become personally liable for your business debts. If it happens you should look for debt settlement options i.e. IVA, Debt Management Plan or Bankruptcy.

Reduction in income

A reduction in your income can create immense financial problems. Whether your hours are cut back, overtime is taken away, or you have to quit a second job, you must regulate your spending habits accordingly.
If you keep spending at the same rate, you will find it difficult to make both ends meet without obtaining a loan.


Many people do not take it seriously but gambling can contribute a great deal in your debt problems.


Death of someone in a family can create a financial emergency. This is the situation where your savings can help you a great deal.

Single parenthood

Parents raising their children on their own face more financial hardships than others. Should anything happen to the parent’s main source of income, a nest egg will be crucial.

Post a comment