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Key takeaways
- If you find yourself only making minimum payments, falling behind on bills, or your debts exceed half your income, debt relief might be necessary.
- Consider debt relief if you’re relying on credit cards for daily expenses, living paycheck-to-paycheck, or experiencing financial stress.
- When your credit score starts declining, you’re receiving collection calls, or you are considering bankruptcy it’s time to explore debt relief options.
When it comes to debt we’d all like to sweep it under the rug and not admit that we’re in over our heads. Tempting as that might be, it’s not a great solution in the long run.
When ignored, debt can easily spiral out of control and trap you in a seemingly endless cycle. It’s better to face the situation head on and if you need help ask for it.
So how do you know when it’s time to ask for help? We’ve made a list of key indicators to determine if you need debt relief.
1. You’re only making minimum payments
If you find you’re only able to make the minimum payments on your credit card bills it’s a clear sign your financial burden is too high.
Minimum payments provide a false sense of security. Yes, you’ve paid your bill but you’ll still be charged interest on the remaining balance and increase your debt.
If you can’t pay more than the minimum, it’s time to consider debt relief.
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2. You’re behind on credit card bills
Falling behind on credit card bills or loan payments is a red flag. As soon as you miss a payment, you’ll be charged late fees, possibly higher interest rates, and damage your credit score.
With all the fees and interest charges it can be hard to get back on track after only one missed payment. If you find that you’re consistently behind and can’t catch up, debt relief may be the right choice.
3. Your debts are more than half your income
Nobody means to take on more debt than they can handle, but emergencies happen and it can be easy to fall behind on payments and get trapped in a cycle of debt.
If your debts have piled up and you now owe more than half of what you earn annually, it’s time to seek debt relief. Paying off such a large amount of debt is very hard to do and most people need help.
4. You’re relying heavily on credit cards
If you’re using credit cards for everyday expenses because you don’t have enough cash, it’s an indication that your finances are stretched too thin.
Credit cards are a double-edged sword. Yes, they can help build credit, give you rewards, and let you buy items without cash in the bank but they also come with high interest rates and fees that can get you into trouble when you don’t pay on time. It’s never a good idea to rely on credit cards to cover basic expenses.
If you find you’re doing just that it’s time to take a step back, reconsider your budget, increase your income, and determine if you need debt relief.
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5. You’re living paycheck-to-paycheck
Living without any financial cushion or savings indicates that your debts are taking a significant chunk of your income, leaving you vulnerable to unexpected expenses.
In this case, your financial foundation needs attention. Maybe it’s time to get another job or drastically alter your budget. Debt relief could also be the right move. The goal here is to no longer struggle to make ends meet.
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6. You’re facing financial hardships
Experiencing financial hardships such as job loss, medical emergencies, or other unexpected expenses can exacerbate debt. You may have had a payment plan in place but now it’s gone because you had to repair your car or your salary was cut.
If that’s the case and you find yourself falling further into debt, it’s time to get help and determine if you need debt relief.
7. Your credit score is declining
Your credit score is a reflection of your financial health. A declining credit score, especially due to high utilization, missed payments, or a high debt-to-income ratio is a sign that your debt is hurting your financial health. Look at the factors contributing to its decline to figure out how to fix it.
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8. You’re getting collection calls
It’s distressing to be called by a collections agency or receive overdue notices from your creditors. Ignoring these notices and calls will only exacerbate the situation and delay you getting out of debt.
To make them stop, it’s best to face collection calls head-on by exploring debt relief options.
9. Your health is suffering
Being in debt can be an incredibly stressful experience. It can hurt your mental health, affect your physical well-being, and put a severe strain on relationships. It’s alright to prioritize your well-being and seek debt relief when you can no longer manage the debts and stress on your own.
10. You’ve considered filling for bankruptcy
Bankruptcy can feel like a clean slate but it comes with its own problems. Bankruptcy can stay on your credit report for up to 10 years! This negative mark can make it difficult to open a bank account, get approved for a credit card, or take out any type of loan.
If you’re considering bankruptcy it’s a serious indication that your debt situation is critical. Always investigate debt relief options first and talk to a professional before you go this route.
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Final Thoughts
Recognizing the signs of when your debt is too much is crucial. If you’re struggling with mounting debt, it’s important to assess your situation and determine if you need debt relief.
Relief could come in the form of professional debt guidance, debt consolidation, debt negotiation, or a debt management plan. Either way you choose to go, it’s best to tackle your situation head-on and actively work towards a debt-free future.
