Living on credit can seem like a way of life to some, but it comes with many problems. Here we look at the issue with living on credit, and how to stop.
Millions of families currently live on credit in the UK. The recession hit a lot of people hard, and many families haven't recovered and so live in a constant circle of borrowing and paying off interest. Living on credit is also a modern way of living for many people who perhaps earn less than they need to live. This could be a middle class family, an elderly person, a young working professional, literally anybody can be hit by this way of living.
The main problem with living on credit is of course the interest. The interest charged by payday loan companies can be many times the amount of the original loan taken out, and so the original debt which may have been quite small, may escalate to an uncontrollable level within weeks of the original loan being taken out. Even if a person is able to pay off the interest, they then may only be able to ever pay the interest off, and so the original loan never gets paid and a lot of money gets wasted simply paying the debt off.
The Problem With Living This Way
The key problem is that you never have money to save, and if anything happens to stop you paying that interest off, such as redundancy or illness, then things can escalate extremely quickly. Owing money is always a risk, but when it comes to anything with a high interest rate the risk is even higher. You may also be restricted in how you plan for larger life events like buying a house, having a child or getting married, because of constantly dealing with financial strain. It is also important to remember that any level of debt causes stress, and can have a major impact on a person's mental and physical health. It may also impact the rest of the family. As online broker Solution Loans remarked, it is all too easy to take an inviting bad credit loan if you have a poor credit history when you need extra cash, only to then be stuck in a cycle of paying back the interest for years to come. Even loans with lower rates of interest such as guarantor loans, where a family member guarantees repayments , still come at a high price.
Getting Out Of Debt
Getting away from credit and out of debt is not an easy journey, but it is a worthwhile one. For some, simply budgeting in a way that gives them an end date to their debt is a light at the end of the tunnel, and something to work towards. For someone who feels that their situation is extremely serious and they feel they don't have answers, then speaking to an impartial free organisation like National Debtline or Citizens Advice is a good idea. You may also want to speak to a family member or a trusted friend about your situation, just to get your feelings off your chest and to get some support. It is important to recognise that there are many ways to stop living on credit, and it starts with an honest look at your finances, so you know what you need to do to make things better. Living in credit is not a position you should keep if you can help it, because you deserve to enjoy the money your creditors are currently getting from you.