The main causes of over-indebtedness.

Over-indebtedness is a situation in which a borrower finds himself in great difficulty with several lending operations. It can no longer cope with its deadlines. The reasons which push a borrower to go into excessive debt are various. Sometimes he exposes himself to it independently of his will.

Failure to repay

Failure to repay

Debt is one thing, but over-debt is another. In more explanatory terms, over-indebtedness consists for an individual in accumulating loans without being able to pay them, according to the maturities and the amount of repayments agreed with the credit institution. It is characterized by the very impossibility of repaying, the amounts to be repaid greatly exceed the borrower’s repayment capacity.

The decline in purchasing power

The decline in purchasing power

The reasons which induce a borrower in such a situation are multiple. There are exogenous causes to households, namely the economic situation of the country where they reside. We can take the example of the disproportion between the financial resources of the household compared to the prices of goods on the market.

Indeed, an increase in the price of basic necessities on the market, not followed by an increase in income, can reverse the equilibrium thus inducing the household to a reduction in their capacity to discharge their debts.

Job loss, illnesses

Job loss, illnesses

Economic measures linked to a restriction of staff, thus causing job loss or technical unemployment for the borrower, can also constitute a cause of over-indebtedness. Then come the illnesses causing a partial or total loss of the borrower’s validity, depriving him of his job. Thus, for lack of sufficient financial resources, the repayments no longer meet the agreed amounts, debts accumulate, and the borrower finds himself in a situation of over-indebtedness.

Reasons specific to the borrower

That said, the situation of over-indebtedness can be linked to poor management of the financial resources of the household: for example, the borrower takes out a personal loan without proof, takes advantage of this possibility of non-justification to spend the money for superficial needs. However, the deadlines run, the amounts to be reimbursed are prefixed and should be paid.

To solve such an equation, the borrower could be tempted to take out a new loan to pay off the previous debts and so on … Which ultimately leads to a situation of over-indebtedness, in addition to the risks of loss of assets provided as guaranteed with the credit institution.

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