With the wide availability of credit and lending companies, acquiring
debt is relatively easier to do today. Obtaining debt can be as fast
and easy as you can imagine but repaying it may take quite a long time
and it could be the start of a greater financial burden.
Getting out of debt is definitely a difficult thing
to do especially when you are regularly plagued with utility bills,
phone calls in the workplace and letters from lending companies. Over
accumulation of debts can give you emotional and psychological burden
and in worst cases, it can cost you your assets and properties.
In
the short run, debt can be beneficial as it offers immediate relief to
the borrower especially in stressful and crucial circumstances. However,
when repayment time comes, problems arise. Inability to pay your debts
on time may incur drastic negative impacts in your life.
In times
of uncontrollable financial burden, many people tend to seek protection
of the law by declaring bankruptcy. It is one of the best ways to get
out of debt all at once. Debt can also cause people to get evicted from
their homes. In some cases, it can cause wage garnishment, foreclosure
of mortgaged property and emotional troubles which can even lead to
suicidal tendencies.
Despite the impacts of making debt, why do people continue to obtain it?
Why People Fall Into Debt
When consumers are asked why they have fallen into huge debts, the most
common answer would be “lending companies are widely available and they
have been so lenient about allowing me to borrow money regardless of my
capacity to pay”.
There are lots of factors which can trigger
people to obtain debt. Poor management of income and finances is perhaps
the most common cause of debt. Most people today tend to spend more
than their means. Undeniably, there are people who have difficulty in
controlling their spending behaviours. Also, there are others who have
not developed the habit of saving. Whenever an emergency arises, they
turn to lending companies and even to loan sharks just to finance their
immediate needs.
Other factors include reduced income,
unemployment and divorce. These are unforeseen or unanticipated
circumstances which may force a person to apply for debt. The high cost
of medical expenses during emergency situations such as accidents and
loss of a loved one can also drive people into debt.
Why Do People Fall Into Debt- Neuroscientists Explain
This
is less commonly known but brain activity actually influences the
decision of people in making debt. Using the Anticipatory Affect Model,
neuroscientists explain why people fall into making debts.
Assumptions
of the Anticipatory Affect Model The model works under an assumption
that all future outcomes bring about certain degrees of uncertainty
which may induce potential losses or gains. The anticipation of certain
gains increases arousal and valence which gives rise to certain emotions
such as excitement. This promotes approach behaviour.
On the
other hand, anticipation of potential losses reduces arousal and valence
which paves for the occurrence of certain negative feelings such as
anxiety. While potential gains promote approach behaviour, potential
losses on the hand promotes avoidance behaviour.
Potential gains
stimulate arousal and activation of the nucleus accumbens which
facilitates risk taking. Meanwhile, negative arousal elicits the
activation of the anterior insular which reduces a person’s risk taking
ability.
The Anticipatory Affect Model Explains Debt
Basically,
the promise of immediate monetary gain from debts increases a person’s
positive arousal and activation of the nucleus accumbens thereby
increasing his ability to take risks. On the other hand, delayed
monetary losses might not result to negative arousal. Instead, it was
found out that the activation of the anterior insular during the
anticipation of losses increases a person’s ability to avoid monetary
losses.
Studies show that people who have rapidly learned to seek
monetary gains have more financial assets while those who have rapidly
learned to avoid monetary losses have fewer debts.
Scientists
concluded that differences in the activation of the anterior insular
accounts for some people’s avoidance from losses. People who are
sensitive to potential losses are more likely to avoid debt. They have
further concluded that the lack of sensitivity towards any potential
loss plays a major role in promoting debt.