Thursday, July 18, 2024
HomeBusinessThe Top 5 Reasons People Wind Up in Overwhelming Debt

The Top 5 Reasons People Wind Up in Overwhelming Debt

Date:

Related stories

Adam Lindemann’s Venus Over Manhattan Wraps Up Latest Show-Stopping Exhibits

Founded by Adam Lindemann in 2012, Venus Over Manhattan...

100+ Smooth Pick-Up Rizz Lines For You To Rizz Up A Girl

Have you ever tried approaching someone? but failed...

Utanmaz Türkler: Exploring Cultural Nuances and Societal Impacts

Introduction "Utanmaz Türkler" translates to "Shameless Turks" in English. This...

Why Trusts Are Key to Wealth Preservation

When it comes to preserving wealth across generations, few...

Debt’s more common than you might think. Over 73% of Canadians have some type of outstanding debt that they carry over from month to month, whether that’s a car loan, a mortgage, a student loan, or credit card debt.

It’s fair to say that debt has become a normal part of everyday life and contemporary society, but sometimes debt can become too much. When that happens, there are debt solutions. Talking to a Licensed Insolvency Trustee will show you the different options you have for getting out. LITs like Bankruptcy Canada offer debt solutions such as consumer proposals that can offer an alternative to bankruptcy as well as get you out of debt sooner.

While there are solutions, it also helps to know some of the most common causes of overwhelming debt.

#1 Spending More Than You Make

Overspending can become a big issue if it keeps up over time. Taking vacations on credit, relying on credit cards to buy groceries, or taking out payday loans without a solid plan for paying them back can quickly get out of control. The interest payments can make it difficult to pay the debt back and wind up costing a lot in the long term.

A consumer proposal can be a highly effective tool for getting out of consumer debt, but it’s just as important to address the habits that led to overwhelming debt in the first place as well.

See also  FY22 fiscal deficit target likely to be met

#2 Student Debt

Student debt is one of the most common types of debt that Canadians face. Many students take out loans when they’re as young as 18. The payoff is a degree and higher lifetime earner potential. It’s usually a worthwhile trade, but it can hang around your neck for years when you’re done school.

Student debt can only be included in a consumer proposal seven years after the last day you were a full- or part-time student.

#3 Separation

Separation and divorce can be tough for many reasons. Finances can be an afterthought when you’re going through a separation, but the expenses quickly add up. People are often surprised by the effect of splitting their expenses after a period of being together. Separation can also come with additional costs like alimony, which can leave people relying on credit for other essentials.

#4 Unemployment or Medical Leave

A sudden loss of income is one of the most common reasons that people wind up carrying large sums of debt. They may need to rely on credit cards or lines of credit to get them through those rainy days, but that debt can linger long after they’ve gone back to work.

#5 Unaffordable Mortgages

The recent rapid rise in interest rates has exposed a glaring weakness in many homeowners’ finances. Following the explosion in housing prices that came throughout the 2010s and into the early 2020s, many homeowners took out very large mortgages in order to be able to own.

They did this during a period of historically low interest rates. Central banks had kept rates very low in the wake of the Great Recession, and the pandemic only spurred them to cut further.

See also  Gold Down, Investors Continue Digesting Latest Fed Meeting Minutes By Investing.com

When interest rates rose rapidly to curtail inflation, homeowners who had to refinance quickly found themselves in trouble.

Debt solutions like consumer proposals cannot help with mortgage debt or any debt that’s secured with collateral. What they can help with is things like credit cards or lines of credit that you may have relied on in order to keep making your mortgage payments.

Bellie Brown
Bellie Brownhttps://businesstimes.org
Hi my lovely readers, I am Bellie brown editor and writer of Businesstimes.org. I write blogs on various niches such as business, technology, lifestyle., health, entertainment, etc as well as manage the daily reports of the website. I am very addicted to my work which makes me keen on reading and writing on the very latest and trending topics. One can check my more writings by visiting Cleartips.net

Latest stories