Reasons for Debt

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

Marriage Break-Ups

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

Employment Changes

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

Health Problems

Serious health problems, particularly mental health problems, are another major cause of financial difficulties. Over half a million people in the UK are unable to work through some sort of mental illness, and whilst mortgage protection insurance policies will offer cover for many illnesses, they exclude most forms of mental illness.

Change in Interest Rates

The general economic climate is another 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 house 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, house 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.

Simply 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 shop, or they could be unable to resist the urge to be generous. We all like to help people out, whether it's our children or our friends, but sometimes helping them out can get you into trouble.