Debt Disaster
One of the fastest ways to debt disaster is to use credit cards to pay your mortgage.
Shelter, a homeless charity organization, recently conducted research that indicates as many as a million people have used their credit cards to pay their mortgage at some point in the past year. Those that conducted the research found it shocking that so many people would use a credit card to pay their mortgage when the interest rate for credit cards is often three times the interest you would pay on a mortgage. When you take these facts into consideration, it is easy to see how switching your home lone debt to credit card debt can be an easy way to create debt disaster.
Numerous people have become complacent with their debt in recent months due to the lack of real disaster hitting the average person being attributed to the recession. People see that unemployment has not yet reached the numbers predicted, nor have home repossessions. Luckily, fewer people than what was forecasted have lost their homes due to the recession and being unable to keep up on their mortgage payments.
Research from the Shelter organization suggests that the worst of the recession is not over yet. It’s true that not everyone who uses their credit card to pay their mortgage will end up with a debt disaster, when you consider the interest rate you’ll be paying on that credit card debt, it’s plain to see that it isn’t the smartest method of paying your bills. A large number of people who do use plastic to pay their mortgage will likely default on their mortgage at some point, or their credit card debt. It is also possible that they may default on both.
When looking at news reports concerning the recession, one important fact to keep in mind is that a large part of the reason that their have not been as many home repossessions as was expected is because the lenders have been asked to be more understanding during these difficult times.
Another factor to consider is that those who have been fortunate enough to be employed during the recession did have a little more disposable income due to tax cuts and lower interest rates. There is every chance that 2010 will see these extra recession provisions stop, and when this happens, the economic disaster will hit a number of people, causing a dramatic increase in debt.
Although using credit to pay bills is one method of reaching debt disaster, there are other ways, such as using your credit card to purchase more than what you can afford to pay for. Part of the blame for this can be put on the new marketing schemes of credit card companies, retailers, etc. These marketing schemes often advertise in ways that cause consumer carelessness, but in the end, it is the consumer’s responsibility to use credit wisely.
Creating debt to pay debt is one of the surest roads to financial disaster and overwhelming debt.