What Are the Causes of Financial Debt?

Between home loans, student loans, automobile loans and credit cards, very few Americans live without debt. Many consumers manage their financial debt, making regular payments and watching their debt level decrease. Other consumers struggle with their financial debt, making only minimum payments and continuing to accrue additional debt. Consumers find themselves struggling for a variety of reasons, including job loss, divorce, medical expenses and home or car repairs.

Job Loss

Working people purchase homes and automobiles on credit based on their earnings. Sometimes employers struggle and need to lay off their employees. The employee who now finds himself receiving unemployment benefits at a fraction of his employment income may struggle to make payments on his house or car. He may use his credit cards to pay utility bills or purchase groceries during his unemployment. This added credit card debt, on top of his car loan and home loan, can drive him into financial debt.

Divorce

Divorce can hurt spouses emotionally, as well as financially. Each spouse usually hires a lawyer, possibly using a credit card to pay for this service. The spouse may have to take time away from work to attend court dates. If one spouse moves out of the house, there are now mortgage or rent and utility payments to make on both residences with no increase in income. The spouses often pay these additional expenses through the use of credit cards or personal loans. The spouses debt load increases as a result of the divorce.

Medical Expenses

When a family member suffers from a medical condition, the expenses add up quickly. Cancer, diabetes and heart disease all require prescription drugs and medical treatments that may not be covered by insurance. The expenses not covered by insurance fall on the family to pay, either by credit card or by making regular payments to the health provider. These debts continue to accumulate while the ill family member gets treatment. She may not be able to work during treatment and therefore is living on a reduced income while experiencing growing credit card charges and other debts.

Unexpected Repairs

Unexpected home and auto repairs contribute to financial debt, often in big ways. If the furnace goes out in a home during the winter months, a repairman may charge additional fees to come fix it or replace it. If the engine dies in a vehicle, the owner may need to purchase a new vehicle or spend thousands of dollars to repair the engine. These unplanned repairs often contribute directly to credit card debt.