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Debt Article | Debt


Consumer Debt

Broadly speaking, consumer debt is any debt from credit that has been used to fund the purchase of something. This includes credit card debt, cash advances (for example through cheque cashing services) and any goods that you opt to ‘pay later’ for, among others.

Purchase

Consumer debt is what you as a consumer use to fund the things that you buy, and can come with a huge variety of different types of credit agreement. As is the case with any debt, you should make sure you understand, and are happy with these terms and conditions, before you agree to a credit deal.

Interest

Many types of consumer credit are associated with high interest rates. If you’re taking out a credit agreement to purchase something, work out how much you’re going to end up having to pay for it over the period of the credit, and compare this to the cost of buying the goods now, asking yourself if it’s worth it – consider saving up for it instead if possible.

Consumer Debt

Cost

In many cases you’ll end up paying many more times the cost of the item you’re funding through consumer credit. Also, credit arrangements such as credit cards will offer you a minimum payment amount each month that may seem to keep your monthly bills down, but in reality will perpetuate the debt for a long time.

Remember that it’s in the interests of the credit companies that you pay the most amount of interest, so they may well make it easy for you to pay only small amounts each month, meaning that your overall debt isn’t actually getting any smaller, and you’re tied to them for a long time.

Sadly, many lenders take advantage of the fact that you may need either funds or purchases at short notice, charging high interest rates to people who feel they have no other choice. Bear in mind that any deal that looks too good to be true probably is, particularly if you have a poor credit rating.

Consequences

Within our economy, consumer debt has been encouraged in recent years to stimulate the production of goods, but now we are seeing the negative results of this culture, with many people struggling to meet their bills.

Help

If you’re having trouble with debt, the Consumer Credit Counselling Service may be able to give you advice about how to handle it. Similarly, the Citizens Advice Bureau is able to help you to work out what your debts are and to go about settling them.