Signs that you need to seek debt management options
Searching for a way out of debt can feel like a lot. There are a lot of different options advertised to people in financial straits. It’s hard to know which option is the one that will work best for you. Should you try a debt management program, or should you go straight to filing for bankruptcy? How do you get debt consolidation? It’s normal to have questions.
There are debt management options that will help you get things under control without requiring bankruptcy. Whereas a bankruptcy will discharge you quickly, it will require you to liquidate assets, and it will stay on your credit history for years. Debt management is about getting payments under control so that you can climb out of debt in a reasonable timeframe on your own.
Signs that you owe too much
These are signs that you’re in over your head, and you need help. If you recognize any of these patterns of behavior in your own financial life, contact a certified Credit Counsellor from a non-profit credit counselling agency who will work out a debt repayment plan with you.
Credit misuse
You use credit that you know you can’t pay back; you only make minimum payments every month. Minimum payments are a trap that will maximize the cost of debt.
Stalling to pay someone else
You have to skip paying one lender in order to make payments to another, a stalling tactic that you can only juggle for so long, and that will have a negative impact on your finances regardless. Every time you miss a payment, it goes on your credit history.
20% of your income goes to debt
The cost of servicing credit cards can balloon over time. While you may be able to get by paying 20% of your income every month on debt payments, it’s extremely expensive, and you won’t have any flexibility for life events, like a job loss or an illness.
Overcharging your cards
If you’re charging more on your credit cards than you pay back each month, the amount you owe is climbing, and you’re on your way to facing a situation where you pay too much each month on interest rates.
High-interest debts take more than 2 years to pay
How long will it take you to get out of your high-interest balances? Whereas a mortgage is supposed to take decades to pay off, the high interest charges on credit cards make carrying a balance longer very expensive. If your projected timeline is more than two years, you should find a way to make it cheaper, such as debt consolidation.
Paying bills with a cash advance
In addition to letting you make purchases on credit wherever you go, credit cards also let you take out a cash advance at the ATM. Sometimes, people use a cash advance on one card in order to pay off balances on another. That’s a tricky game that can keep you from going into collection, but the interest rates on credit card cash advances are even more expensive than your usual borrowing.
Any of these signs should be a big red flag. Your problem may be bigger than you’ve admitted to yourself, but the good news is you can do something about it.
