More than eight million people in Britain have problem debts according to new research from the Money Advice Service. It can be easy to lose track of your finances for a while if you have a busy life, juggling work and family. So if you have that sinking feeling that you really need to look at your debts, but you aren’t sure how bad your problem actually is, the quick quiz in this article is for you!
There are ten classic signs that debts are getting out of control. If you spot them early enough, then you can take action so that you don’t end up with a full-blown crisis.
The quiz – ten warning signs
How many of these apply to you? If you aren’t sure about one, give yourself a half mark…
- using your credit card to pay for everyday expenses such as food, petrol and bills.
- scared to add up your debts because the number might be really big.
- only able afford the minimum payments to your credit cards each month.
- your partner thinks everything is under control because they don’t know about some of the debts.
- rejected recently when you have applied for more credit.
- unexpected expenses seem to crop up most months, making it hard to stick to a budget..
- your overdraft costs a fortune because you are often over the limit.
- you have rent/mortgage arrears or are behind with this year’s council tax.
- your debts going up each month as you are spending more than you repay … or you are using a credit card to pay another debt
- you have expensive “bad credit” debt – payday loans, guarantor loans such as Amigo, logbook loans etc.
What’s your score?
0 great! 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 move a bit 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. A small cut to your benefits, less overtime, a big car bill – anything could prove really difficult to cope with. You and your partner need a major review, looking at how to get the family finances back under control – if it all seems hopeless, then get some debt advice now, before you get to the crisis point.
5+ crisis You are probably already borrowing from one lender to repay other debts – at some point you can’t borrow any more and you can’t pay your debt. It may not be this month, but if you don’t take action now pretty soon you will be getting phone calls and letters from debt collectors. Read up about what your options are – choosing a debt management plan (DMP) where interest is frozen on your debts may be a good option for you. There may not be any nice choices, but the longer you wait, the harder they will get.
Who can help?
If you are thinking that this is a huge mess and you are going to need some assistance to get it sorted, there is a lot of help out there. Look at Good places for debt advice – whether you would rather talk to someone in person or on the phone, there are not-for-profit organisations whose first aim is to help, not to make money from you.
If you feel you just need some support to be able to manage yourself forums like MoneySavingExpert’s Debt Free Wannabe are there any time of the day and the night, with useful ideas, kind words and sometimes a friendly kick to get you back on track.