Copyright

Debt Repayment Issues: Signs & Examples

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

In this lesson, you will learn what common signs people have when they have problems paying back debt. You will also see how these signs can escalate from one to the other.

Debt

Meet Jason. He is in his early twenties and totally enjoying his newly found freedom. He just moved out on his own for the very first time, and he is living it up. He goes out every weekend with his friends, and they go to all the popular restaurants around town. But Jason isn't very rich. In fact, he has a job at the local coffee shop that pays just enough to cover his rent, utilities, and some extra for groceries and gas. So, how is Jason able to live it up like he is doing? He does this by relying a lot on his credit cards and a personal loan he was able to get right when he finished college. Even though Jason tries to pay back as much as he can each month, he finds that his debt isn't getting any smaller. As a result, Jason has been labeled as an at-risk customer by his credit card companies and by his personal loan company. These companies are starting to see signs that maybe Jason won't be able to pay back his debts and loan.

In this lesson, we define debt as what is owed to someone else whether it be an individual or another business. A loan is the same as a debt except a loan is generally a formal debt you enter into in writing. Let's take a closer look at Jason's warning signs in this lesson.

Paying Only The Minimum

The first sign that Jason shows is that he is only paying off the minimum amount he owes. This means that when Jason gets his invoice, he pays the very minimum payment that is allowed. See, each of his credit card invoices shows Jason the total that he owes along with the minimum payment that he needs to pay for the month. Jason can pay any amount above the minimum. But if Jason doesn't pay the total amount he owes, the credit card company charges him an interest rate on the amount he hasn't paid. It will take Jason quite a few years to pay off his credit cards if he only pays the minimum, and if he continues using his credit cards, then he won't be able to pay it off at all.

Increasing Debt

This leads us to the second warning sign that Jason is getting himself into. Because Jason is only paying the minimum and he is continuing to use his credit card, his credit card debt isn't getting any smaller. In fact, his debt keeps getting bigger and bigger. He is charging his credit cards more than he is able to pay them back. This is not a good thing. If he can't pay back his credit card debt, there will come a time when he will have reached his spending limit. Thus, he will have no more credit card money to fall back on.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support