As a person practically every day dealing with debtors who got a credit loop, I constantly hear the same words: “If I knew a few months ago what I know today, my debts would be half as much.” It is a truth as old as the world. Only that the same debtor a few months earlier was at the stage of credit starvation and did not even think about any help other than help in finding a loan. I will share with everyone in need what I know about the debt loop. I know that many of you will find yourself at some stage. And perhaps, knowing the further stages, he will turn back – shaking off the eclipse sooner than having reached the bottom.
The credit loop usually starts innocently
Achieving a certain stability in life means security. The feeling of financial security gives you the comfort of buying certain goods or services for borrowed money. Convenient installments mean that you can use the purchased goods immediately, and repayment – thanks to several months of installments – becomes unnoticeable. After all, it is financial security in the form of a permanent job or a stable own company.
The rush for the growing need for many people causes the safety border to be shifted or even blurred. The limit of the ratio of monthly obligations to income. An illusory sense of security pushes it up to 80%.
For example, a family with a total income of $ 8,000 spends as much as $ 6,000 on repayments. Living modestly for 2000 dollars. It is important that everyone has new cells, the car stings the eyes of neighbors, and photos from holidays in Bali conquer Instagram.
Moving the border to this level is actually the beginning of the credit loop. God bless that nothing will happen over a period of several years’ repayment. But this usually doesn’t happen. And enough
A slight grind in finance to create a credit loop
This creak can be anything. Traffic cullet or a serious car breakdown, illness requiring financial outlays or simply worsening wage conditions. Misfortune usually arises because of the lack of 5-10 thousand dollars. That the family may have long put off in case of unexpected events. But the model family does not save, does not postpone, but buys and consumes. In addition to credit. So when it turns out. that a financial hole is created due to unforeseen events, the average family reaches for the only solution they know. About which at this moment does not yet know that it causes an avalanche of future misfortunes.