No one likes mentioning the dreaded “d” word. There is no clearer sign that you are struggling financially than being in debt. Whether it is owing money to someone else or the government, mounting debt that is left unpaid can have a drastic effect on one’s credit score. This is why it is imperative to understand the early signs of being in debt, to begin with. It is always easy to lose track of our spending on credit cards or other irresponsible financial habits until we see how much we owe. Here are some warning signs to be wary of.
Consistently Making Minimum Payments
Making the required minimum payments each month is not an inherently bad practice, especially if you are able to make these payments on time. However, no matter how much you owe on a particular debt, if you find yourself only making the required minimum payment, you will spend much more time paying off that debt and pay a larger total when all is said and done. This can be especially the case with larger debts such as student loans. Many people think that only making the minimum payment will make their lives easier, but this often is just a stalling tactic.
If you owe a large sum of debt, it would behoove you to pay as much as possible every month, because, with each minimum payment, you extend the loan’s shelf life as the interest continues to accumulate. Organize your finances and put yourself in a position where you can increase the sum of the monthly payments you are making. Expert advice and consultation can be sought through resources such as those offered by the debt consolidation experts at Roseland Associates.
Consistently Making Large Monthly Payments
Of course, while you do not want to make the smallest payment possible per month for the sake of paying your debt off quicker, you also do not want to be too aggressive with your payments either. The general rule of thumb is that you should not make monthly payments that comprise 20% or more of your monthly income. If you find yourself paying more than this, you may not have enough income to cover other necessities such as utilities, food, housing, and transportation. It is absolutely critical that you pay down any balances at a rate where you still have enough to take care of yourself. This is even worse if 20% of your income is only the minimum payment for your debt.
Getting a Cash Advance
Getting a cash advance is perhaps the worst way to obtain a credit card. This is because the money is typically loaned to you at the worst terms possible, and the one-time charges tend to be very high. Unless you have a genuine emergency in which you need an advance quickly, avoid this at all costs. If you have taken a cash advance for the sake of paying down your debt, the repayment of the advance should be a priority because the advance has much more daunting interest rates. You can learn more about balancing interest rates and rates can be expect by contacting Roseland Associates. While they do not offer a cash advance, they deal with various forms of debt on a daily basis.
Your Debt Impacts Your Personal Life
If you find that your debt is impacting your friendships and relationships with others, this can also be a sign that you are carrying too much debt. When debt remains unpaid, it can result in a litany of complications that can impact your interpersonal relationships. This is especially the case if it can affect your means to provide for a family if you have one. If you have not created a budget that incorporates every possible charge, you fall behind fast and your debt will not leave you.
Your Payments Get Declined
There is nothing more embarrassing than going to the register and needing to take out multiple cards because each card is declining. This is an easy tell-tale sign that you owe too much money. If you have a credit card that is either maxed out or near its limit, you are carrying too large a debt. Refrain from using credit cards for purchases until your existing balance has been paid off to manageable levels. If you believe that your debt is out of hand, then there is likely an issue that you have to address. Learn better financial habits and spend the money on your credit card responsibly.
As you can see, paying off debt is a serious responsibility that will require financial diligence on your part so that it does not come back to haunt you. Be cognizant of these warning signs so that you can put yourself in the best possible position to pay your debt off in full.