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Top 25 Reasons People Go Into Debt

Many people facing debt feel overwhelmed and defeated by the amount of money they owe. This can  lead to avoidance and even denial of the situation. The first step towards gaining control over your financial debt is to understand what caused it in the first place. This can also help you refrain from accumulating more debt in the future. We have listed the top 25 reasons people go into debt, and things they go into debt for. Once you know where your money is going, you can effectively channel it until your debt is paid off entirely.


Life Necessities

1. Home Mortgage

For many people, a lofty mortgage loan is the biggest debt they have. While home ownership is a rewarding experience that is vital to everyday survival, it can cause a lot of stress if not handled correctly.

2. Car Loan

Having a car allows you to enjoy a level of convenience and independence that usually cannot be derived from public transportation. However, many people cannot afford to buy a car in cash and therefore either finance or take out a car loan from their bank.

3. Student Education Loans

The number of college graduates who default on their student loans increases every year. Getting an education is an admirable goal, but unfortunately many people cannot find employment after graduation and are forced to work odd jobs so they can make ends meet.


Credit Card Debt

4. Dining Out

Eating at restaurants is a big issue, especially in the United States. Our hectic lives often make it difficult to cook a quality meal at home. Many people find themselves stopping by a drive-thru window for a quick meal, even if it means pulling out the credit card.

5. Gasoline

As the gas prices continue to rise, it is becoming more and more difficult to keep the fuel gauge in your car topped off without using a credit card. This has led many people to sell their cars in favor of more fuel-efficient vehicles such as scooters or motorcycles.

6. Recreation and Entertainment

Using credit cards for fun and self-gratification is an easy trap to fall into. We often convince ourselves that we can afford things we want such as electronics, new clothes, or a fun night on the town. However, these little purchases add up and can lead to serious financial trouble over time.


Life Circumstances

7. Medical Bills

If you become seriously ill and don’t have health insurance, you will probably be given a large stack of medical bills asking for thousands of dollars. Even people who have health insurance are sometimes faced with large expenses that they are unable to pay off.

8. Marriage Ceremony

Getting married is one of the most beautiful experiences life has to offer. However, sometimes it leaves young couples with a lasting debt for years after the ceremony. Payment plans are often used for purchases like the engagement ring and wedding dress due to lack of available funds.

9. Unemployment

A sudden loss of employment can leave your finances in a dire position. When people find themselves without an income, they turn to loans and credit cards to cover basic monthly living expenses such as food and shelter.


Poor Money Management

10. Lack of Financial Knowledge

People are taught how to spend money, but they are not given much information on how to use it wisely. It can feel good to buy something you can’t afford using credit or payment plans. Unfortunately, most people aren’t aware of the long-term financial consequences.

11. Investment Losses

Investments are usually a smart financial move that can greatly increase your monetary potential. In some rare instances, however, investments can take a turn for the worst. A lot of people enter into investment commitments without a solid strategy in mind.

12. Failure To Budget

People who are financially successful usually have a budget that they follow quite strictly. It is hard to control your finances when you don’t know how your expenses compare to your income. This also leaves you unprepared to handle emergency expenses that may arise.


Legal Complications

13. Owing Taxes

It is a horrible feeling when you file taxes and find that you owe more money than you can afford to pay. This situation is a common misfortune for self-employed workers and entrepreneurs. This often forces people to pay their taxes using credit.

14. Court Fines

If you get in trouble with the law, you can expect to pay the courts a lot of money before your case is finalized. Depending on the severity of your situation, you might also be looking at expensive lawyer fees. This scenario has pushed many Americans into debt.

15. Divorce and Separation

Divorce situations are quite costly. On top of paying thousands of dollars in legal fees, you can also be held accountable for paying your spouse money or even paying off some of their debts. In many cases, this leaves people struggling to recover for years after the divorce is finalized.



16. Payday Loans

Taking out a payday loan is quite tempting when you don’t have enough cash to survive until the next paycheck. Most people do not realize that these loans are attached to expensive fees and outrageous interest rates.

17. Retail Store Financing

Many retail stores such as Best Buy and RC Willey’s offer financing for large purchases, and also provide store credit cards that can be used like a traditional credit card. Retail stores make it easy to qualify, but hefty interest rates can make it difficult to repay the debt.

18. Start-Up Business Costs

If you are starting a new business and you don’t have enough seed money to begin operating, you may be forced to take out business loans. This can be a good investment if your business makes a profit, but can leave you with a looming debt if you fail to break even.

19. Having A Baby

Pregnancy and childbirth is an exciting experience, but expecting parents often dig themselves into debt to prepare for it. Additionally, single mothers with a young child may not be able to work full-time and must resort to loans and credit to make ends meet.

20. Home Equity Loans

If you already own a home and are thinking of refinancing, then a home equity loan may be a good option. However, keep in mind that home equity loans are essentially a second mortgage and affect the equity of your house.

21. Cosmetic Surgery

Surgical and cosmetic procedures are becoming more and more popular. These kind of operations can range anywhere from a nose job to laser hair removal. Most people cannot afford these procedures in cash and therefore enter into a financing agreement.

22. Funeral Costs

The loss of a loved one is already stressful enough, but many times the families of deceased relatives must foot the bill for funeral expenses. This is especially an issue if your relative failed to obtain life insurance when they were alive.

23. Inherited Debt

Most of the time, personal debt is considered a loss after the individual is deceased and the family is not held accountable for it. Unfortunately there are a few exceptions to this. If you co-signed for any loans or financing, the debt could fall on your shoulders.

24. Home Improvement

Whether you are fixing a broken sink or repairing a damaged roof, home improvements are sometimes essential purchases to maintain quality of life. People often resort to using credit cards or taking out home improvement loans to cover the costs of repair.

25. Recreational Equipment

In addition to making monthly payments for their primary automobile, a lot of people finance recreational equipment such as ATV’s and motorboats. Purchases like these lose value over time, and the debt can end up exceeding the value of the vehicle or equipment.

Have any of these situations put you in debt? Let us know in the comments!

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