Causes of Bankruptcy

With the discovery of the credit card, people prefer paying their small bills with them. What most people do not understand is that they end up paying more than they would have otherwise paid in cash. This has been known as one of the major causes of bankruptcy. The interests charged on the credit cards continue to accumulate as more items are bought using it. As the interest accumulates, it reaches a point where one is caught up in paying the interest accumulated.

Insolvency is also caused by the small loans that people acquire to buy items. As they do this, interest charged on the card keep escalating. This way, the buyer ends up paying for what he bought years back as opposed to saving for the future. This, to many is referred to as a snowball since the accumulated debt continues growing big due to interest charged. This habit in the long run becomes an addiction leading to some to be declared bankrupt.

Another reason for this is illness, especially where the individual or a family member has a chronic illness which requires hospitalization and expensive drugs. This leads to high medical bills due to long periods of time spend in hospital. This mostly occurs to those with no medical insurance.

It is advisable for one to consult a financial expert on financial matters as a way of avoiding bankruptcy. A financing option may seem a cheap way to go, but it ends up being costly in the long run. Worse still, it may end up becoming an addiction which may cause an individual more harm than good in the end of it all.