Are You Showing These Signs of Uncontrollable Debt?

Debt is a heavy burden that can way down your finances, relationships, and plans for the future. However, it has become so common that many people expect to be in debt their entire lives. According to recent data, the average American has almost $102,000 in debt as of 2022. However, you can choose a different way. If you are showing any of these 10 signs of uncontrollable debt, it may be time to assess your situation and seek expert advice to help regain control.

10 Warning Signs of Uncontrollable Debt

1. It seems impossible to save money.

Building your savings is an important financial step and should be a part of your short and long-term plans. As part of your financial planning, you should be saving money in some form every month. This could be in your emergency fund, retirement funds, or dedicated savings accounts.

But if you are at a point where it seems impossible to save anything, you need to take a hard look at your finances and spending habits. When your savings are decreasing instead of increasing, it is a serious sign that you have a debt problem.

2. You rely on credit cards to pay for everything.

Credit cards are an important financial tool. Unfortunately, you can do a lot of harm to your finances if you don’t understand how they work.

Credit card debt is the most expensive kind of debt with interest rates above 20%. Carrying balances causes you to pay more in interest fees, and high utilization can also impact your credit score. If you rely on them to cover your necessities, you probably have a lifestyle that is incompatible with your spending. It may be time to evaluate your budget and make some hard adjustments to help you live below your means.

3. You regularly use one credit card to make payments on other ones.

Balance transfers are a smart move if you can get a better interest rate. But if you are taking on new debt to pay off older ones, it’s a sign that you have a significant amount of debt that may be spinning out of control.

It’s one thing to use it as a tool to get out of debt, but it’s another if you are using it to stay afloat. Playing with balance transfers can be a tricky game, especially when there are time limits on interest rates. Many people learn the hard way that it’s a risky gamble that could land you deeper in debt.

4. Every month, you only make the minimum payments on your outstanding balances.

Low minimum payments are great for your monthly budget. However, they don’t help pay down your debt. Most don’t realize that minimum payments are intentionally designed to keep you indebted.

Making minimum payments becomes a revolving door of debt that could take decades to pay off, and it will cost you even more with the additional fees. Therefore, you should try to pay off your balances every month, or at least put as much as you can toward the principal. If your balances keep growing, then you need to find ways to curb your spending or bring in more income to help you get your finances back into the black.

5. Your credit cards are maxed out.

Credit cards can be a helpful financial tool when building credit. But, you shouldn’t be relying on them or maxing them out. This will negatively impact your credit score and could affect your ability to obtain loans in the future.

So, if your cards are often declined at the point of sale or you have to check multiple cards for authorization, these are red flags of uncontrollable debt. If left unchecked, these habits could leave you with a lifetime of uncontrollable debt and regret.

6. You frequently need cash advances.

Although it can help in an emergency, cash advances are one of the worst ways to use your credit card. In addition to the high fees and interest rates on repayment, these advances diminish your money’s buying power. If you frequently find yourself needing them, it’s time to reassess your priorities and how you manage your money. You will be much better off by establishing an emergency fund so you won’t be held hostage to the terms of a cash advance.

7. Your debt is more than half your income.

Having a higher debt-to-income ratio is another red flag. Not only does it mean that a good portion of your earnings will go toward your debt instead of building your assets, but you also have less flexibility to cover unexpected expenses.

Keep in mind that lenders typically look for a ratio of less than 36%, but the lower, the better. If your debt is more than half your income, it will be nearly impossible to get loan approval. Unfortunately, the only way to improve your chances is by lowering your debt-to-income ratio.

8. Creditors have denied your application.

Although there are many reasons for rejection, excessive levels of debt will cause lenders to deny your application. From their perspective, high debt is a sign that you are unable to manage your finances. Therefore, you are a greater risk and more likely to default on your payments.

If this is happening again and again, be sure there is nothing in your credit history that is inaccurate or outdated that is affecting your creditworthiness. However, if it is a result of your finances, you should consider seeking out expert advice to help make a plan to get a handle on your situation.

9. There are several missed calls from creditors and collection agencies.

When you start missing payments, you can expect creditors to call and try to collect their outstanding debts. But after enough time, most will turn it over to collection agencies. Mistakes happen, but if you are dodging calls from several agencies, then you have a serious problem.

First and foremost, defaulting on your payments hurts your credit score. Secondly, collection agencies are more persistent and may even threaten you may threaten wage garnishment, repossession, or other legal recourse to get their money. However, most agencies are very reasonable and will work with you to establish a payment plan, negotiate terms, or settle for a lump sum for a fraction of what you owe. You don’t have to be afraid to answer your phone or let your debt control your life.

10. You choose to remain unaware and ignore the issue.

In most cases, people understand there is a problem with debt. But, do you know exactly how much? And, do you have a plan to become debt free? Or, have you just resigned yourself to it?

Choosing to remain unaware is probably the worst thing you can do for your finances. Although it can be unpleasant to face the truth, you should know where you stand and what your next steps will be. If you choose to remain unaware or avoid your problems, they could snowball into uncontrollable debt.

Debt Relief Assistance

If you are drowning in debt, there are plenty of resources available to help you regain control. Although many people use debt consolidation loans, there are also debt relief agencies that can negotiate your payments, offer credit counseling, and assist with debt settlement.

There is no shame in asking for help. Seeking expert advice is an important part of financial planning. You can work with a financial advisor to help you set a budget, live below your means, and start saving for the future.

Read More

• What To Do if You Can’t Keep Up With Your Debt
• 6 Negative Emotional Effects Debt Has on Families
• How to Choose the Best Debt Management Program for You