Debt can be scary. It can be tempting to sweep it under the rug and try to avoid it. It’s easy to ignore all the phone calls and letters from collections agencies. However, these actions can lead to even more problems down the road. Read below to learn ten debt warning signs you shouldn’t ignore.
1. You Don’t Know How Much Debt You Have
If you’re getting invoices or bills from companies and you don’t recognize the names or amounts, it’s time to get a handle on things. When you don’t know how much or to whom you owe money, you’re setting yourself up for financial disaster.
Make a List
Pull your credit reports and start keeping every debt letter you receive. Make a spreadsheet or other list that details each debt, current balance, due dates, creditor information, payment amounts, and any additional relevant information. You might be able to consolidate your debts for more manageable payments.
2. Your Income Won’t Cover Minimum Payments
More than half of America lives paycheck to paycheck. Many people don’t have enough income to make minimum payments on what they owe and fall behind on their bills. Past due debt accrues interest and late fees that can add up to more than the original debt.
Find an Option
Suppose you’re unable to make minimum payments on credit cards, loans, mortgages, and other debts. In that case, you should find other options for managing your financial situation. A lump sum debt settlement may be an option.
Creditors often accept a lower amount in one lump sum because it’s cheaper than chasing after late payments. Another option is bankruptcy.
3. You Are Dodging Bill Collector Phone Calls
If you have collection agencies calling you day and night, then you might want to find a way to stop it fast. Creditors typically only resort to these measures if you’ve become significantly late on payments. They are usually open to finding a solution for repayment that works for you.
You can make them an offer to settle the debt for a low percentage – often as little as 20% of the original amount – or ask for a payment plan.
4. You Borrow Money to Pay Debts
You have too much debt if you borrow money from friends, family, or payday lenders (cash advance). The debt you’ve accumulated may be more than your income can support.
Get Legal Advice
You should immediately stop borrowing money and seek legal advice to determine how to handle the debt you have accrued. Chapter 7 bankruptcy can eliminate unsecured debts that pile up in these situations.
5. You’ve Used All of Your Savings on Debt
Paying off long-term debt or a sudden considerable expense like a medical emergency can drain your savings account. Don’t leave yourself without a safety net if you lose a job or another emergency happens.
6. You Use Credit Cards to Pay for Necessities
Ideally, your credit cards shouldn’t have more than a 30% balance on them unless you plan on paying it off quickly. While credit cards help with unexpected emergencies, using them to pay for groceries is a sign of money mismanagement.
7. You Hide Spending from Friends and Family
If your friends and family have noticed how much you shop and make comments, you might want to think twice about breaking out that credit card again. Living beyond your means is a quick trip to going broke.
8. You Lose Sleep Over Debt
If you stay up at night thinking about your debt or suffer from anxiety or depression due to financial issues, you need to seek help. Money should not control your life.
Talk to a Professional
Work with a financial planner to help you develop strategies to address your debt and talk to a debt lawyer who can help you eliminate it.
9. You’ve Maxed Out Your Credit Cards
Credit cards are good tools to build your credit score and can even help in a pinch. However, there may be a problem if you constantly have them at or over your credit limit. You might consider cutting them up and repaying the balances you owe.
10. You Were Denied Credit
If lenders have denied extending credit to you because of your current or past debts, that is a sign you need to handle your debt. Whether your credit score is low or you don’t have enough established credit, you need to build a positive credit history.
Sometimes declaring bankruptcy is a viable option for people in debt. While a Chapter 7 bankruptcy does remain on your credit score for as long as a decade, constant overdue or unpaid debts also affect your credit.
Call an Understanding Debt Lawyer
Dealing with debts can be difficult. It often causes anxiety and other negative emotions. Most people need help from a professional to get the best outcome when dealing with creditors. The knowledgeable debt dispute lawyers at Luftman, Heck & Associates can help you through this situation.