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Top Five Causes Of Debt

A recent survey we carried out on the web shows that many people believe the top five reasons for people getting into debt are:

1. Low (and Reducing) Incomes, But Increasing Costs

This is related to inflation and the price rises for core things that we need buy in order to live; including paying for food, heat and light. The basic cost of living in the UK is rising at 2.7% according to EU figures quoted in the Daily Mail, but incomes are only set to rise by 0.5% in the next year [BBC].

2. Budgeting Errors

Mistakes in managing money by underestimating the cost of core expenses and overestimating income is another key contributor to accumulating debt. Once tipped out of balance, a poorly managed budget can rapidly spiral into debt, with overspends spilling over from month to month. Having no savings in this situation reduces the likelihood of correcting these budgeting errors.

3. Redundancy, Unemployment and Wage Decreases

Decreasing earnings through changing work contracts and reducing hours, or through losing a job altogether is closely linked to financial problems, stress and debt. Even with redundancy payments or benefits available, the loss of a wage can quickly contribute to debt, particularly when living costs can't be reduced by a similar margin. Ill health and being on long term sickness benefits can also dramatically reduce household income. Adjusting costs (like downsizing, or cutting bills) can take time, during which the risk of debt and mortgage arrears is considerable.

4. Divorce and Separation

The costs associated with the break up of a relationship, including legal fees, relocation costs and separation of assets are considerable. In addition to this is a frequent squeeze on earning potential, particularly if there are children in the family who still need substantial childcare. The cost of running two homes instead of one is substantially higher, and can frequently result in mortgage repayment defaults and arrears.

5. Poor Credit Card and Loan Management

Covering up deeper financial budgeting issues with poor use of credit cards, payday loans and other borrowings can escalate debt issues rather than solve them. Simply burying debt repayments on credit cards, or borrowing more to pay for repayments, can quickly grow a debt burden, and even accelerate it as interest rates on short term loans and borrowings are notoriously high.

If you're struggling to get out of debt and have mortgage arrears or are even threatened with foreclosure and eviction, call us and see if we can help. We provide support, advice and even finance to people in mortgage arrears. Call one of our advisers in confidence today and together we will make a start to turn your finances around. 01258 818182.

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Additional Sources Of Advice

Here you can find additional sources of advice and support for debt problems and concerns.