Top signs that you’re in too much debt
Many consumers have some form of debt, whether it’s in the form of credit cards or secured loans. Sometimes we have become so used to having debts that we don’t always realise when they are becoming a problem. As long as you can afford to make your monthly repayments, you presume that everything is fine. However, it only takes one small problem to cause a setback and lead to serious financial difficulties.
There has been a lot of talk in the media about how the economy is beginning to recover. This hasn’t necessarily filtered down into all sectors of society, though, as levels of personal insolvencies are continuing to grow. For the second quarter of 2014 there was a big rise in the number of people becoming insolvent. This amounted to 27,029 people across England and Wales, which was up 5.1% on the same quarter last year, according to the Insolvency Service. This was largely as a result of a 20% increase in those seeking Individual Voluntary Agreements (IVAs).
If you think you might have an issue with your finances, here are the top signs that could indicate you have a debt problem.
You Always Make the Minimum Payments
Dealing with your credit card debts in this way is not a realistic method of paying them off. This just covers the bare minimum and means the debt will keep on growing and take many years to clear. In order to actually pay off some of the debt rather than just covering the interest, you should be paying a large chunk, if not clearing the balance, every month. If a credit card debt is becoming unmanageable, it might be possible to move to a 0% deal. This will enable you to pay off the debt during the promotional period without incurring further interest charges.
You Can’t Face Your Total Debt
Often when people are heavily in debt, they try to hide away from the situation. If you don’t realise exactly how much you owe and can’t account for all your spending, then you could be facing a big financial problem. Assessing and dealing with the situation is the best way to manage any form of debt. In times such as these many people turn to debt consolidation loans but this may not be the right path for everyone, as our next paragraph points out.
When you start using new credit in order to pay off existing debts or meet monthly repayments, it’s a sure sign that you have a problem with your finances. This can lead to further difficulties, especially if you start relying on payday loans or cheque-cashing services. One way of dealing with this situation is to take stock of your monthly outgoings and see exactly where your money is going. This should allow you to allocate money to pay off your existing secured loans and other debts.
Outgoings Are More than Your Income
If you have to dip into your credit every month to meet essential expenses, then it could soon become a problem. Assess what you spend your money on and cut out any unnecessary items. Look at all the areas where you’re spending too much and see how you could save money, such as having a plan before food shopping or comparing utility bills.
You Put Essentials on a Credit Card
It’s important that you can afford to pay for essentials, including food, travel and utilities, out of your regular income. If you’re putting these on a credit card and can’t pay off the balance at the end of the month, you definitely have a problem. In some cases, this is because you have to pay too much towards your debts. In this situation, a debt management plan could be a means of paying off your debts at a more manageable rate, but this will increase the repayment period.
Your Credit Rating Has Been Affected
When you apply for new credit and are rejected, it’s likely that your credit rating has been affected by your issues with debts. It could be due to having too much existing credit or because you’ve had some late or missed payments. It’s important to get a copy of your credit report and see what the issues are. In some cases, there might have been a mistake or you can work to rectify the situation