8 Common Causes of Unsecured Debt

Unsecured debt is pretty much exactly what its name implies, debt without the safety net of having collateral tied to it. To help educate Americans on this type of debt, we have put together the following list of the 8 most common sources of unsecured debt.

Student Loans
Although you may be thinking, "student loans are secure because they are backed up by your education," this is only the case if said graduate uses said education. However, in today's economy getting a high paying job right after graduating can be difficult, if not impossible.

Medical Bills
Medical bills can at times be even more of a burden than a student loan. If you do not have medical insurance and get a serious injury then you can very quickly accumulate thousands of dollars in unsecured debt.

Cash Advances
Cash advances can be a simple and quick solution to a temporary shortage of cash. However, the fees and interest rates are high and can reduce you paycheck dramatically. For this reason, people often get caught up in a "revolving-door" type of situation with cash advances, giving over a sufficient chunk of their paychecks monthly. Try to avoid this type of unsecured debt unless it is your last option.

Overdrawn Bank Accounts
Overdrawn bank accounts are almost always unexpected and can quickly turn into thousands of dollars in unsecured debt. Keeping track of your finances and balancing your check book may seem like a pain, but it's better then this pricey alternative.

Credit Cards
Credit cards can be a great tool for building credit, or the worst thing that ever happened to you, depending on how you use them. The best way to avoid ending up with massive credit debt is to never spend more than you know you can afford. Simply put you should not be living "beyond your means."

Legal Fees
As necessary as they can sometimes be, legal fees are never very fun to pay. If you are on the winning side, they are often worth the price. However, if you lose the case or do not get a settlement then the legal fees can quickly add up, especially if you are required to pay your opponents legal fees as well.

Department Store Cards
Department store cards can be some of the riskiest types of unsecured debt because they are so easy to get. Often as long as you do not have bad credit, even if you have no credit, you will qualify for one. However, the interest rates are usually very high which can cause your debt to grow at a quick pace.

Excessive Cell Phone Bills
Unless you have a pre-paid phone, the bill can be quickly become quite a chunk of unsecured debt. The best way to avoid this mess is to be honest with yourself when you sign up for your phone on how many minutes, features, etc. you are actually going to use.


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