15 Signs You’ve Fallen Into a Debt Trap

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fallen into a debt trapToday I have a guest post. Enjoy!

If I ask you, “Is your debt out of control?” and you answer “don’t know”, you are not alone. Many people don’t know that they’re overburdened with debt or don’t accept that they are in financial trouble. And, as a result, the debt keeps on growing. It is quite important to know and accept that you’re neck-deep in debt to act on it and find a suitable solution.

How will you know that your debt is out of control?

Here are 15 signs that can help you decide whether or not you have fallen into a debt trap.

You are stressed and have trouble sleeping

If you are stressed about paying back debt and you can’t sleep, it’s a big sign that your finances are beyond your control. You may be waking up during the night worrying about your finances. The moment this happens, you should pay attention and work on it. Choose a debt repayment strategy and solve your debt problems fast to have a healthy body and mind.

 You don’t know how much you owe to your creditors

Do you know exactly how much you owe to your creditors? If you have a vague idea, then it’s a red alert for you. Analyze your statements and calculate the outstanding amounts. Also, note down the interest rates and names of creditors for your reference.

 You can’t save even 5% of your paycheck

You should save at least 10% of your paycheck. If you can’t save even 5% on your monthly income, it means most of your income is used to satisfy your debt payments. If you are living paycheck to paycheck, it is a sign that you’re living beyond your means and your debt is out of control.

You are hiding the truth of your financial position from your family

Do you talk to your family about your debt if you have a lot of it? If no, then you may have a slight problem and you might feel ashamed to disclose it to your partner or other family members. There’s nothing wrong with that. Just work on your debt when you can.

Your debt-to-income ratio is more than 35%

The creditors and lenders assess your DTI or debt-to-income ratio to determine whether or not you’re creditworthy. So, calculate your DTI by dividing your recurring monthly debt by your gross monthly income, and multiply it with 100 to get your ratio.

 You have to choose whether to make debt payments or meet necessities

It may also happen that with your income, you can either make debt payments or meet your daily necessities. You have to compromise with one. When this is the scenario, immediately seek help without further delay.

You have taken out a payday loan to manage expenses

Have you taken out or are looking for a payday loan? That means you’re not able to meet your daily necessities and debt payments with your income. So, either you have to increase your income or find a suitable solution to be current on your secured debt payments and get rid of your unsecured debt fast.

Your credit score has taken a dip

Do you check your credit scores, at regular intervals, from the 3 major bureaus? Well, you’re one step ahead to tackle your finances efficiently if you do so. Your scores give you an idea about how you’re managing your financial life. You can dispute errors if any. If you find that your credit scores have reduced and there isn’t any error, then it might be you have excessive debt.

You are being denied loan or credit

If you’ve applied for a credit card or a loan, but you’ve been denied, take a close look at your finances. It might be you don’t have a clear idea, but your creditors/lenders think that you can’t handle further debt.

You struggle to make even minimum monthly payments

When you can’t make even the minimum monthly payments, not only is it a sign that your debt is beyond your control but also your debt is growing fast. The interests and late fees are adding to your balance every month.

You have to borrow to meet your necessities

Have you decided to make your debt payments but have to borrow from your friends if there’s a financial emergency? If so, assess your debt burden. You may need professional help to tackle your debt.

You earn a decent income yet fail to pay the bills

There can be two reasons when you fail to pay the bills even if you have a decent income; either you’re overspending now or have been doing so, as a result of which, you’re drowning in debt.

You are getting annoying collection calls

Your debt is assigned or sold to debt collectors when you’ve already defaulted on your payments. So, when you get a collection call for a debt that you owe, it’s a sign that your debt is out of control. If you don’t act now, soon you may get collection calls for other unpaid accounts, too.

Your debt is affecting your personal relationship

Money problems are one of the major reasons for marital conflict and divorce. So, when you feel that debt is affecting your personal relationship, do not avoid it anymore. If you have hidden the fact from your partner, disclose it, and try to solve it together.

You have tried to repay debt but haven’t been successful

Have you tried to pay off debt on your own? Might be you underestimated your debt amount and didn’t choose the right option.

You have to choose a suitable debt relief option to reduce your debt burden and pay it off. If you’re facing difficulty to deal with multiple debts, you can choose debt consolidation. However, before selecting the option, gather knowledge about debt consolidation pros and cons so that you’re well aware of the option. But, if you’re experiencing many signs discussed above, then you might have to resort to debt settlement to tackle your debt problems. Whatever option you choose, do not delay. Act fast. The faster you start paying back debt, the more money you can save on interest payments, and faster you’ll have control over your financial life.

Can you add to this list any other sign that your debt is out of control?

Good Nelly is a financial writer who lives in Milwaukee, Wisconsin. She has also written for numerous websites and blogs. You can follow her Twitter profile.