Do you have a debt crisis looming? You don’t have bailiffs knocking at the door or creditors taking you to court… but you may be headed in that direction. If you can spot the early warning signs that your debt is becoming a problem, then you will be able to take action now to stop things getting worse.
Check these ten signs:
How many of these apply to you?
- are you using your credit card to pay everyday expenses such as food shopping, petrol and utility bills because there isn’t enough money in your bank account?
- are you unsure how large your total debts are, and worried that the answer may be large?
- do you only make the minimum payments to your credit cards each month?
- does your partner think the situation is under control because they don’t realise the full extent of your debts?
- have you recently applied for a consolidation loan or other credit and been declined?
- do you find it hard to budget because of unexpected costs that seem to crop up most months?
- is your overdraft costing a fortune because you often go over the agreed limit?
- do you have priority debts such as rent/mortgage arrears or are you behind with this year’s council tax?
- are you adding more to your credit cards each month than you are paying off, so the balances keep going up?
- have you had to take out expensive “bad credit” debt to get by – payday loans, guarantor loans such as Amigo etc?
How bad is it?
0 – good! Read up about snowballing to see how you could pay off your debts quicker, but you are doing all right.
1-2 so-so You aren’t yet on a slippery downward slope, but think about how you could improve your finances to get further away from the danger zone. Face the facts by knowing exactly how much debt you have and whether this is getting worse or improving.
3-4 danger zone Things can get bad pretty quickly from this point. You and your partner need to have a major review, looking at whether you can increase your income, make real cutbacks and stick to a budget so your debts stop going up. The first rule of getting out of a hole is stop digging!
5+ crisis It may not be this month, but if you don’t take action now pretty soon you won’t be able to make your debt repayments. Borrowing more from payday lenders only postpones this point and makes it harder in the end. Read up about possible debt solutions – choosing a debt management plan now may be a good option for you. There may not be any nice choices, but the longer you wait, the harder they usually get.
Need some outside help?
If you are thinking that this is a huge mess and you are going to need some assistance to get it sorted, then there is a lot of help out there. Read Where to get debt help and advice because that points you in the direction of not-for-profit organisations whose first aim is to help, not make money from you. If you feel you should be able to manage yourself but just need some support, then forum’s like MoneySavingExpert’s Debt Free Wannabe will be there any time of the day and the night, with hugs, encouragement and sometimes a friendly kick to get you back on track.