5 Signs That Your Debt Is Out of Control


Debt is a heavy burden. Not only can it weigh down your finances, but it can also impact your relationships and plans for the future. However, you don’t need to let it take over your life. If you are showing any of these 5 signs that your debt is out of control, it’s time to take action and regain your independence.

5 Signs That Your Debt Is Out of Control

1. You rely on credit cards for everything.

Credit cards are a very useful financial tool. They can help you establish a credit history, consolidate payments with balance transfers, and offer several types of rewards. But, they can also cause irreparable damage if you don’t understand how credit works.

As a general rule, you shouldn’t use them to pay for all your monthly expenses unless you are able to pay off the balance every month. Since they carry the highest interest rates, credit cards can keep you in debt for decades. So if you are carrying balances, you should review your budget and ensure that you are living below your means. Eliminating unnecessary spending will help you maintain a lifestyle that is compatible with your financial goals.

2. Your cards are maxed out.

Credit cards can also be helpful when financing large purchases. But if your cards are maxed out every month, it’s a red flag that you have a serious problem. In addition to hurting your credit score, it also causes you to accrue thousands of dollars of additional debt.

Oftentimes, this is a result of habitual overspending. And, it will quickly spiral out of control if you ignore the problem. However, there are counselors and debt relief agencies that can help you make a plan.

3. Your debt is half of your income.

Debt-to-income ratio is an important statistic for creditors. It provides a tangible way to evaluate your risk level and helps determines the terms of loans. Lenders typically look for a debt-to-income ratio under 36%. Although, the lower, the better.

If your debt is more than half your income, it leaves little flexibility in your budget. Not only is it harder to save for the future and invest, but it also means you are more likely to default on payments when you have unexpected expenses. For those who are at this threshold, it’s time to take immediate action to reduce your DTI ratio.

4. Lenders deny your applications.

Lenders deny applications for a variety of reasons, including excessive debt. But if you are consistently being denied, you need to understand why and start addressing the issues. There may be steps you can take to improve your credit history and your chances to obtain funding. Take a deeper dive into your history and ask yourself:

    • Is everything in your credit report accurate?
    • Can you have something removed?
    • Is it possible to work with the creditor to get it off your credit report?

It can be overwhelming if you don’t know where to start. But, seeking expert advice can help you regain control of your debt and your finances.

5. You are avoiding calls from creditors and debt collectors.

When you are unable to afford your monthly expenses, you may have to choose which bills you pay. However, if you miss enough payments, you should expect lenders to start contacting you. They will try to collect, or turn it over to a collection agency to do it for them. Unfortunately, avoiding the calls could lead to bigger problems, including legal action.

The good news is that many creditors are willing to work with you if you notify them of your circumstances. If you explain your situation, they can work out a repayment plan, set up installments, or negotiate a lump sum settlement.

You don’t need to live in fear of your finances. However, you are the architect of your own future. You have to be willing to assess your situation and take the necessary steps to regain control and financial independence.

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