There are numerous reasons why people get into debt. The feeling of panic and fear of the unknown are understandable for many people who struggle to manage their debt. However, anybody with debt worries is not alone.

If you have a debt problem and need debt help then you can contact Debt Support Trust on 0800 085 0226. Alternatively, if you would prefer face to face debt advice we would recommend speaking with the Citizens Advice Bureau.

Debt Problems: Reasons For Debt
The variety of reasons for people struggling to manage their finances underlines the diverse nature of debt. Whether you’re male or female, young or old, homeowner or a tenant, you could at some point in your life encounter a debt problem for one of the reasons below.

Our reasons for having a debt problem are determined by asking people who contacted Debt Support Trust for help during 2011, “How did your debt problem arise?”.

1. Unemployment
Losing your job is scary. Your income suddenly drops whilst your expenditure remains relatively static. It’s a problem which many of us can sympathise with. In January 2012 the unemployment rate was 8.4% of the UK working population. This means 2.68 million are unemployed according to Government figures.

With the cost of your rent or mortgage, council tax obligations, food bills, car insurance direct debit, payments to your car hire purchase and repaying your unsecured debt, you may struggle to make ends meet. If you’ve squirreled money away for a “rainy day” then your savings can help see you through. However, most Brits have limited savings and after the second or third month will turn to friends, family or even credit to survive.

Always pay your priority expenditure first. This means your mortgage/ rent, gas, electricity, council tax and food. Any money left over should be paid towards your unsecured debts such as your credit card, personal loans and overdrafts.

There are two reasons why unemployment was the most popular reason for people contacting Debt Support Trust with their debt problem. The first was because they used credit whilst unemployed to survive. The second and possibly more problematic was most people had taken out credit before they lost their job, however the credit was manageable and at least the minimum payments were being made. After losing their job it became impossible to make even the minimum payment towards loans and credit cards. Subsequently, interest and charges increased and the debts get out of control.

If you have unsecured debt and become unemployed you should speak to your creditors, explain the situation as most creditors will be happy to provide you with a short period to get back on your feet. You will still have to make a token payment towards your debt but this will be lower than your contractual obligation. Many creditors will be happy to freeze interest and charges during this period so your debts don’t continue to climb.

2. Reduction in Income
The second most popular reason for debt problems arising is a reduction in the household income. Whilst similar to unemployment, reduction in income is different as the person in debt is still employed but in either a lower paid job or with fewer hours in their existing role.

Since September 2009 the number of people unable to find full time employment has gradually risen. In September 2009, 13.6% of part time employees stated they worked part time because they couldn’t find a full time job. By the end of November 2011 that figure had risen to 17%. Similarly, the percentage of people in temporary contracts that couldn’t find a permanent job in November 2011 was 38% (up from 34.1% in September 2009).

Part time employment means less working hours and subsequently a reduced income. A popular approach taken by financially struggling UK businesses is to retain employees, however offer them fewer working hours to reduce the cost of employing staff. This may keep people in employment but the reduction in their income will have a knock on effect for their expenditure and payments towards their unsecured debts.

People struggling with debt should contact a debt advice charity for assistance. There are a number of realistic solutions to help manage debt problems if you have reduced income and debt problems.

3. Over-commitment to credit
It seems like an obvious reason for a debt problem, but the third most popular answer people gave for struggling to manage their debt was because of an over-commitment on credit.

Borrowing money carries a fee called interest. By missing payments credit companies can also add on charges. Juggling multiple unsecured debts, coupled with the interest payments and potential charges, can mean making the minimum payment towards a debt is impossible.

When people begin using credit the repayments will be affordable, but an over reliance on borrowing can result in multiple sources of credit and several monthly payments to different companies.

The average person contacting Debt Support Trust in 2011 had 8 different creditors.

Often, people who have become over-committed on credit have not frivolously spent the money on luxury items. Usually over-committed spenders have been trying to make ends meet; to put food on the table, cloth their children or pay the bills.

By the time we speak to somebody with an over-commitment to credit they can no longer afford their monthly contractual payments. Most people will have defaults on their credit file, creditors will have been ignored and debt collectors could already be involved.

The three questions to ask before borrowing money are:

– By borrowing money will you be able to make the monthly repayments?

– Are you satisfied being in debt for months or years until the money borrowed has been repaid?

– Have you completed an income and expenditure and do you know your current credit commitments each month?

If you feel over-committed on credit do not use a payday loan company as it only makes the situation worse. Seek help from Debt Support Trust or another debt advice charity. You can get in touch by telephoning 0800 085 0226 or by completing our debt analyser.

4. Divorce/ Separation
The fourth most popular reason people gave for debt problems was as a result of separation or divorce.

Living separate lives means double the rent / mortgage, gas, electricity, council tax and increased cost of food. This must all be done on the same income.

In the majority of instances, people who said their debt problem began because of separation or divorce also had children. The cost of living independently, coupled with raising a child can be expensive for each party. It’s generally thought that the low divorce rate in the UK is a consequence of people being unable to afford to live independently again and leave their partner.

There are savings and support available for people who have separated. Advice and support is on hand for people with debt problems because of separation or divorce.

5. Increased expenditure
The fifth most popular reason for debt problems was an increase in expenditure. If expenditure increases but income remains stagnant then disposable income is affected. Over time if expenditure continues to increase and people can’t afford to make ends meet they often turn to credit for help.

Using credit under this circumstance becomes a problem because ultimately the person with constricting disposable income may eventually be unable to repay the debt. When minimum payments on their credit commitments become too large they will again be struggling.

The cost of gas, electricity, petrol, food and other essential items have increased over the past decade. As a result the people closest to the bread line will feel the changes hardest. Whilst other people may be able to adjust their living costs and remain within their disposable income, other people will undoubtedly turn to credit as a source of support.

Getting Debt Free Help
Payday loans have become increasingly popular and target this group of people. Despite working full time the pay packet just won’t spread far enough and payday loan companies often recommend borrowing from them. Generally this is not the answer as the fees are extortionate.

If you have debt problems because of an increase in your expenditure there are a number of debt solutions available. By seeking debt advice from Debt Support Trust you can get your payments back to a manageable level.