In answering this question, how do we find ourselves in debt, we don’t “find” ourselves in debt, debt is a process. And a process which can be a lengthy one.

The Process That is Debt

You get your first credit card.

You go to university, and take out student loans.

You need a loan to buy a car, or buy a care on HP (Hire Purchase).

You buy a home, a property.

You take a cruise or holiday of a lifetime.

Then one day you wake up, see the post and the bills, and you are in debt (insert amount here).

Debt is a process.

Why Do We Borrow?

We borrow for a variety of reasons, and the main reason is because we cannot afford to buy or make the purchase we want; we do not have the money to make the purchase.

If we were to save the money, we would not need to borrow money.

And when you borrow money, you are in debt.

Plain and simple.

Can you afford to buy a car with cash? No, you take out a loan.

Can you afford to pay cash for a property, no, you take out a mortgage.

Can you afford to but that item of clothing, no, so you use a credit card.

There in lies, why we borrow.

If we had the cash, odds are we would not need credit.

credit card

Easy Credit

For years many banks and lenders, made getting credit easy. Hey, they need to make money, too, and they can make money off the interest they charge. So the more loans lenders make, the more interest they can collect.

Loans + interest = more money.

Many banks and lenders made getting credit easy, and it some ways it came back to bite them in the ….

Borrowers could not repay their loans and credit cards, and defaults went up. But it is a cycle. The cycle of easy credit, then credit crunch.

Getting Out of Debt

Getting out of debt is a process just as getting into debt is a process. And as with both processes, neither happens overnight.

There are many options to get out of debt, but only a few get you out of debt quickly. Bankruptcy is the quickest, and even that takes 12 months.

So we need to keep in mind. Getting into debt, and getting out of debt, is a process, and be aware of the warning signs.

More on warning signs here.

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