According to the oxford dictionary, a person is defined to be in debt when he/she owes some amount of money to somebody else. The reason why a person goes into debt is major because of the expenditure is more than the income. There can be various reasons for this happening and it becomes necessary to know how a situation of this type occurs as it would help us analyze the function of debt in our daily lives.
Let us take an example of a family X. Suppose this family has been keeping their personal finances under check and be able to breakeven the income with the expenditure incurred in the various needs of the household along with any extra contributions here and there. Suddenly, there arises a situation where the expenditure rises forcing the family into debt. To cover up the deficit, there is a need for new financial planning which would include cutting down on the costs.
What are the situations which can lead to debt as an after effect? If this question is answered, the planning can be done beforehand and much trouble avoided. Debt Settlement is a legal, logical and ethical way to get out of debt.
The various reasons causing financial debt are:
Loss of Job
Loss of Job is one of the major reasons for increasing debts (go for debt financing – it’ll help you mucho!). Since the loss of a job cuts down on the income drastically but has no effect on the expenditure, the deficit increases causing the individual under the question to induce a condition of financial instability upon himself.
Higher Levels of Expenditure
The level of expenditure is always in comparison to the income levels. If the amount that is spent is high compared to that earned, there can be huge losses coming your way. The people who generally suffer from this category of personal finance problem are those who cannot afford to enjoy a high standard of living but still do so. The amount of debt is further increased if the costs are reoccurring in nature as in the case of medical necessities.
Education can bring along with it a huge financial debt. The tuition fees of the institutions are very high and cannot be met by a lot of people. Debt increases if the families do not cut down on the current expenditure levels to facilitate a proper adjustment of the funds required for education in a planned manner.
There are various schemes that are available which provide the general public with options of buying various assets in the form of houses, investments, insurance, etc. These require the buyer to pay the sum amounting to the value to the assets over the years in prefixed installments called “premiums” resulting in a permanent increase in the expenditure for a long time.
Car title loans refer to the use of vehicles to secure immediate loans. Car title loans are definitely for the benefit of the people who require financial assistance in the face of urgent necessity. There are two options present in the financial market for securing car title loans.
A lending agent verifies the loan application submitted by a borrower and approves it. He, then, instantly advances the loan amount. The borrower will not get the car immediately, as the lender keeps the car with him. He keeps the car so long the borrower does not pay off the entire loan amount along with interest. The lender enjoys a right to sell the car to realize his investment if the borrower does not clear the loan.
In the second option, the lender allows the borrower to take his vehicle as he does not want to keep the car with him. The borrower will have the right to use the vehicle, but he will give a set of keys of the vehicle to the lender to keep. The borrower must have some property of worth in his name. Property of worth may be in the form of a piece of land, a home, real estate, etc. He must allow using the property to be pledged as security. The lender will have the right to take possession of this property if the borrower does not or cannot clear the loan amount.
The loan-seekers should keep in mind that they must clear the loan amount within the stipulated tenure because car title loans are actually short term loans for which interest rates are charged at higher rates. The financial burden will be unbearable if they default or cannot duly honor the loan agreement. The tenure for repayment is simply short, and it is between 14 and 31 days.
The borrower must be entitled to car title loans. He must be at least 21 years old and must be a citizen of the United Kingdom. His monthly income must be at least £1000. He must have an active bank account. This is required as the lender transfers the loan amount to the bank account of the applicant after he approves the application. The applicant must be working in any officially authorized establishment.
The lending agencies that offer car title loans are ready to receive the loan application from the loan-seekers. Application for car title loans can be submitted offline and online.
Starting a business requires a good amount of capital and if you can’t provide sufficient business information then you could be difficult getting a business loan. The bank makes a decision regarding loaning money to the person in concern based on fiscal information like financial statements or dividends information or cash flows. If you are starting a brand new business then you would not be able to provide the lenders with any such documents. If you don’t have a detailed history of your business operations or reports of your financial activity, then it would be quite difficult for you to secure the loan.
In such a situation, you would present your personal financial information to the officer providing small business loans or banker in-charge and you will have to depend upon that to grant you the business loan. You have to understand that this means all these people are in actuality evaluating you. This would include your business plan and your potential as becoming successful at owning and running such a business. You have to understand that it is risky for the financiers to invest in your business because a very high percentage of new business fails in the first few years of its activity. This fact coupled with a complete lack of any financial information about the previous activity of the company would mean a higher risk for the lender to grant you the loan.
So always prepare yourself thoroughly before you go into such a situation. You should also save up enough current assets as living expense for a period of at least two to five years. The good news is that in this modern age you can use the internet and other such modern technology to help you deal with any problem in the process of starting up your own business. With such advanced technology, you would be able to cut down overheads drastically and become profitable business quickly. Therefore, for starting up a new business you should use your personal financial information to secure yourself the capital you need to get your business started. You should know that your effectiveness to manage your work is going to play a big role in making your business a success.
You should present your financial information in the form of an application. Make you that it is well ordered and pleasing to the eye. Also, give a copy of your credit report along with the application. It provides a depth into your ability to control current assets. It is also a good idea to remember your credit score as well as important bits of information about your business. One good idea would be to hire yourself a potential planner such as an accountant or maybe a business lawyer to help you get your views coordinated to reach out and become successful.