What is a Debt Obligation?

A debt obligation is something you are contractually obligated to repay from an either outstanding balance you have utilized or from an original loan amount you have borrowed against. Debts are to be payback within the terms stated or they will be defaulted on. Debts are usually setup with specific terms in which borrowers have a set amortization and payback periods if the debt is a revolving account. The terms will typically include set interest rates, late fee penalties, finance charges, borrowing or credit limits, etc.

Debt in Society

Unfortunately, debt has become ingrained into our culture and every baby born into our world is already in debt and starting off at a deficit of approximately $60,000. Debt has been around a long time, even since before currency was issued and most trade was done via barter. There was debt labor and many people even took up dowry payments in the form of debt. Debt isn’t new by any means but the extent to which our life revolves around debt (whether we realize it or not) has certainly increased. However, much of society has started to become more aware of this and is looking to make debt a smaller part of their lives.

What Happens If You Don’t Pay Your Debt?

If you don’t pay down your debts you will eventually receive late payment notifications from your lenders and be charged late fees typically paired with interest rate increases. Late payments notices will start from 30 days, 60 days, 90 days, 120 days, so on and so forth. After you are 30 days late on a payment, this will typically be sent out to the credit bureaus where the lateness will eventually reflect on your credit report. Some lenders will give some leeway and try to assist you while payments are late but ultimately there are only so many things that can be done before a debt is eventually discharged from the debtor’s books. When a debt is discharged from a creditor’s books the debt is written off as a loss for tax purposes. At this point the debt could move to another debt collectors or even get sold to a law firm where more aggressive legal action is pursued.

Ways Out of Debt

There’s numerous ways to get out of debt it all depends on your situation and what you feel is the right move for you. You can reach out to a reputable debt relief companyor you can try to figure something out on your own. Whatever the case there is always a way to improve your financial situation if you set your mind to it.

Debt obligations serve a need in that they help us acquire an asset or use funds for something that we deem necessary in the short term. Although sometimes the terms of our debt agreements can leave a lot to be desired they do serve a need and without fulfilling that need in many cases we would be worse off. Many consumers carry debt obligations today with the hopes that repayment goes well and that they can save money on interest payments. If not, there are other options available to helps consumers eliminate their debt obligations for less.