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.

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.

If you are showing any of these five signs that your debt is out of control, you must start taking action.

1. You Rely on Credit Cards for Everything

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Credit cards can be very useful financial tools. They can help you establish a credit history, consolidate payments with balance transfers, and offer several types of rewards. However, 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 carry balances, you should review your budget and ensure that you live 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

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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 causes you to accrue thousands of additional debt.

This is often a result of habitual overspending, and it will quickly spiral out of control if you ignore the problem. However, counselors and debt relief agencies can help you make a plan.

3. Your Debt Is Half of Your Income

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The debt-to-income ratio is an important statistic for creditors. It provides a tangible way to evaluate your risk level and helps determine 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

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Lenders deny applications for a variety of reasons, including excessive debt. But if you are consistently denied, you must 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.

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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 it 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. They can set up installments, work out a repayment plan, or negotiate a lump-sum settlement if you explain your situation.

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