Is your debt out of control? Watch for these 6 important signs |
More than a third of all Americans report that their household financial situation has deteriorated over the past year. After seeing a record $83 billion in credit card debt paid off in 2020, balances are starting to pile up again.
A 2021 CNBC report found that the average American owes $90,460 in unpaid debt. Debt and credit can be invaluable financially when buying a home or vehicle, sending your kids to college, and even gaining leverage for business. other purchases. But accumulating a lot of debt is dangerous, as it can cause irreversible damage to your finances, especially if you find it difficult to set financial limits.
Borrowing too much could stretch your finances too thin. Whether it’s car loans, personal loans or credit cards, even if lenders always give you the green light, there comes a time when new debt can put your financial well-being at risk. Not just now, but for years to come.
So how do you know when you’re in too deep?
Here are six clear indicators that your debt may be out of control:
You only make minimum payments
Credit card companies love that you only pay the minimum amount due each month. But, unfortunately, in a short time, you will end up paying a good part of the finance costs, and it will take you several months to pay them all back.
If the minimum amount is all you can afford to pay on your credit card each month, that’s a sure sign that your debt is already depleted.
You can’t get credit
The first thing lenders, like credit card companies, want to see from borrowers is if there is a strong possibility that you will repay your debt.
If you have already gone into debt, you are effectively reducing your chances of getting a new loan. However, if this is the case, lenders will be concerned about your ability to repay a new loan.
If lenders or card companies continue to deny you and the only way lenders can give you credit is on very onerous termsstop and take stock of your situation. If lenders say “No! because of your excessive level of debt, you cannot deny that you already have a debt problem.
You lie about the debt
Have you gotten to that point where you’ve lied to family or friends about how much credit card debt you owe? It’s because you’re already embarrassed to admit that the problem has gotten worse and you don’t want to think about how much money you owe.
Of course, you don’t want other people to learn the truth either.
If your debt is constantly bothering you to the point where you can’t focus on other things and is depriving you of sleep, it’s time to do something about it. Sweeping your debt problem under the rug and pretending it doesn’t exist will only prolong your agony and make your situation worse.
The sooner you face it, the sooner you will find a solution to make positive financial changes.
You frequently transfer your balance
Some people think they can outsmart the smart card companies by shifting their debt from one card to another. They quickly grab a low-interest introductory offer and transfer their balance to the new card.
Once they have transferred their balance and the promotional introductory period has passed, and the interest rate increases, they open another card and start the balance transfer program again.
This strategy may seem inviting at the moment, but it is an empty solution. You get nothing because you just move the debt from one place to another. So instead, you should focus on how to pay it all back.
If you’re not careful, it’s easy to max out your lines of credit, confuse your due dates, and miss payments. So naturally it would affect your credit score, and very soon the credit card companies won’t be willing to give you a new card.
The way to take full advantage of a balance transfer is to transfer to a low-interest card and stop using the card for new purchases. Then do everything you can to pay off your outstanding balance as soon as possible, or at least before the end of the introductory period.
You start to miss payments
If you’ve started avoiding paying specific bills each month, the signs point to the danger that your debts are already spiraling out of control. Also, every time you are late in paying your bills, it will have a negative impact on your credit score.
This would negatively affect your chances of obtaining funding in the future. Plus, paying late also subjects you to late fees, which puts even more pressure on your finances.
You need to borrow to pay your bills
If you have no choice but to borrow money from family or friends, or if you need to make a cash advance on your credit cards, your debt problem becomes serious.
A cash advance on your credit card is the most disadvantageous solution you can think of. You will incur finance charges that are higher than your regular purchases, and you will also incur cash advance charges.
Talk about a double whammy.
Worse still, you’ll run out of sources to borrow money from and you’ll have to deal with all the balances and debts you’ve accumulated.
The best way to avoid this situation is to plan to reduce your expenses and find ways to increase your income. It also means living within (or even below) your means so you don’t have to borrow money from loved ones or grab expensive loan offers.
Don’t Ignore Your Problem – Confront It Head-On
If you see these warning signs, you could very well be courting financial disaster.
Even if your debt problem is staring you in the face, it may be easier to deny the facts than to do something about it. Pretending the problem doesn’t exist can’t save you from the reality that causes you anxiety. Take corrective action before it’s too late.
What is surprising is that when you decide to face your situation and solve your debt problems, your worries will gradually start to disappear.
You may experience pain and humiliation. Yet, the sooner you accept reality and take corrective action, the sooner you can get out of the messy situation. And if you don’t change your spending and debt habits, you’ll sink deeper into the debt hole you’ve found yourself in.
If you think your problem is something you can’t handle on your own, don’t be discouraged. There are people who are ready to help you.
Find a nonprofit credit counselor, financial counselor, or even a volunteer life coach. They can offer advice on how to develop a repayment plan and control expenses.