Eight warning signs you may have a debt problem

Taking on credit to meet your financial goals can be a convenient short term solution. But it can be easy to accumulate too much debt if you’re not careful.

While you may be keeping up with your debt payments, you could be putting a strain on your finances without actually realising it. Before you reach a critical point with your debt situation, you need to look out for these warning signs. 

Eight warning signs you may have a debt problem

To help you identity any issues early and take preventive action, here are eight warning signs you may have a debt problem.

1) You don’t have any savings

If you haven’t been able to save, it could be an indication that you have no money left after paying your debts. Not having any savings can add on to more debt if you have to use a credit card or get a personal loan to cover unexpected expenses. 

2) You have maxed out at least one of your credit cards

Maxing out a credit card is a red flag. It clearly means that you have a debt situation – one that can quickly escalate if you can’t repay it. And it’s going to affect your credit scores. 

3) You only make the minimum payment on your credit cards each month

When you have too much debt, your budget is stretched so thin that you are left with no option but to pay the bare minimum on your credit cards every month. By just paying the minimum amount due, your credit card debt will take forever to get paid off as steep interest gets added on to your existing balance. 

4) You are sometimes late in paying bills

Paying bills late is a sign that you don’t have enough income to cover them (and your other expenses). Sometimes this can happen because a significant amount of your incomings are eaten up by your credit card debt.  

5) You aren’t aware of how much debt you have

If you owe money, it’s essential to have a clear idea of how much this is, and a realistic plan to repay it. Not knowing the full picture puts you in danger of sinking further into debt, especially if you stop opening bills. As hard as it is to face up to the full picture, it’s important to do so.

6) You’re still use your credit card for purchases while trying to pay off your credit card debt

If you are making an attempt to pay off your credit card, but if you are still using it to make the purchases, it is a sign that you don’t have enough cash to meet your day to day expenses.

By paying just the minimum on your credit card and using it regularly for purchases, you are not getting any closer to paying off your debt.  

7) You’ve had loan rejections

Lenders check your repayment capacity before they lend you money. If you have been denied credit, it could be because of the debt load you have been carrying. 

8) You don’t have sufficient funds to clear your cheques

Frequent bounced cheques mean that you are not able to manage your finances because of your debt situation. The banks charge fees for bounced cheques, so you are essentially adding on more debt and making it all the more difficult to bridge the gap.  

How can you handle your debt problem?

If any of these signs are applicable to you, taking control of your debt should go right to the top of your list of financial priorities.

If you have an emergency fund, consider your debt problem as an emergency and tap into it. If you don’t have savings to fall back on, you may want to consider a debt consolidation loan, and use it to pay off your debts. However, ensure that you are using a low-interest debt consolidation loan to pay off your debt. 

Taking on another debt to consolidate your existing debt can be risky if you are not careful. Remember, your aim is to get rid of debt – be responsible, stay focused, and curb temptations. You’ll then achieve financial freedom in the true sense. 

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Photo by Ruth Enyedi