Debt is always a risk when you borrow money. Unless you plan carefully, it is easy to become over-committed, especially when dealing with on-going forms of credit, such as credit cards, where credit can build up over time and the charges sneak up on you.
If you miss the odd credit card or loan repayment then the consequences are unlikely to be severe - credit cards may charge you a penalty for a missed payment, and at the vary least the loan company will ask some pointed questions.
If you persistently miss payments however, you can quickly find yourself in trouble. Ultimate penalties might include CCJs (County Court Judgments), bankruptcy and, in some cases, your home or other property may be at risk.
Such penalties can have a severely adverse effect on your credit rating and you will find it difficult to find other sources of credit in the future. You may find it difficult to get access to various things that require a good credit rating (for instance, most letting agents will run a credit check before allowing you to let a house). Some lenders will still lend you money even if you have a bad credit record, but expect to pay a much higher interest rate in these circumstances.
If you do find yourself unable to meet your commitments, you may be able to negotiate a lower repayment to the creditor. It is important to always offer to pay something, no matter how small an amount (called 'offering to treat'). This is pretty much what a court would order you to do anyway, so if you offer to pay a token amount freely there is little point in the lender taking you to court. Be aware that creditors will not always freeze interest in such cases however, so your total debt may continue to increase.
There are lots of agencies dedicated to help you with debt, which is a growing problem in today's credit-happy society. Don't worry and struggle alone - excessive debt is not the end of the world. Remember that for your creditor, bad debt is just a part of everyday business, and they are not out to get you personally. You can search for debt management companies using the search box at the top of this page.
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