Luottokierre

Luottokierre, a Finnish term, translates to "debt spiral" in English. It describes a precarious financial situation where an individual or entity becomes trapped in a cycle of accumulating debt. This typically begins with taking on new loans to cover existing debts or to meet living expenses. As interest and fees accrue on these growing obligations, the debt becomes increasingly difficult to manage, leading to further borrowing.

The core mechanism of a luottokierre is the reliance on new credit to service old credit. This can be exacerbated by unexpected expenses, a loss of income, or poor financial management. As the debt burden increases, so does the pressure to find additional funds, often through high-interest loans or credit cards, which further accelerate the accumulation of debt.

Key characteristics of a luottokierre include a continuous increase in the total amount owed, mounting interest payments that overshadow the principal, and a diminishing ability to repay. This can lead to severe consequences such as strained relationships, significant stress, and in extreme cases, bankruptcy or insolvency. Preventing a luottokierre often involves budgeting, seeking professional financial advice, and avoiding unnecessary borrowing.