Seven Dangerous Signs that Show your Debts are Out of Control

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[The following is a guest post by Elaine McPartland showing common signs of out of control debt.]

Its 2013, yet Americans are having a hard time saving enough for unforeseen emergencies and even their retirement. Factors like increasing fuel prices, food costs, and other expenses do come into play, but a lot of this has to do with rising credit card debt. As the expenses of the average American household increase over time, people are finding it hard to keep track of their debts.

Here are 7 things that signal that your debts are getting out of control.

Debt Out Of Control

1. High Mortgage or Debt Payments

Experts state there is a certain percentage (usually 30%) of your income that determines whether your debts pose a serious threat. If your mortgage or debt payments comprise of 30% or less of your income, you don’t need to worry that much. But once this limit is crossed, you will eventually have to face a financial crisis.

When it comes to credit card payments, they should not even exceed 15% of your gross income. In this way you can still manage other expenses quite well, but once your credit card payments begin to exceed 15% of your gross monthly income, it is a surefire warning sign.

2. You Don’t Know How Much You Owe

A common, guaranteed way of driving anyone towards financial disaster is losing track of how much you owe. If you are in a tight situation, do not avoid your problem and go for consolidated credit counseling. Helpful services from Consolidated Credit include free debt consolidation.

If you are trying to run from your debts, that means you realize that they have exceeded your repayment capacity. Such an attitude can take your situation from bad to worse in no time.

3. You Are Constantly Anxious

In line with the previous point, a clear indicator of uncontrolled debt is your inability to get a good night’s sleep. However, this is only one aspect of the problem, for debt-related stress, for it causes people to become anxious and even paranoid. When you start worrying about how to pay your bills, get help immediately. Otherwise along with your finances, you will lose out on your health as well.

Some people under the yoke of credit card debt resort to using many things to in order to escape from the pressure, but such habits only makes matters worse in the long run.

4. You Can’t Get Credit

Since 2010, the credit CARD Act prohibited banks from increasing your interest rate just because you defaulted on another creditor who is not related to the bank in any way.

However, banks can reduce the credit they offer you even if you make payments on time. The serious problem lies beneath, and as your credit card balances rise, you will soon cross your optimum credit utilization ratio. Your credit score will drop drastically and eventually you will end up with maxed out cards and 0 credit.

5. You Are Out of Savings

As mentioned at the opening, credit card debts have drained up most people’s savings whether it is for emergency or retirements. If you find yourself drawing more from your savings accounts, become alert and find the root of the problem. If you let this go on, you will find yourself without any funds in case of a serious illness or accident.

And even if you are able to repay your debts, you may never be able to retire comfortably.

6. You Are Trying to Avoid Creditors

When creditors or collection agencies start to call you, you should come to terms with the fact that your debts are no longer affordable. Most people start avoiding calls, much to their own peril.

Creditors do not go away, and they can even take serious measures like harassment and litigation if you try to avoid them.

7. You Are Constantly Taking Payday Loans

Payday loans are a practical option for customers to take care of their short term expenses in times of emergency. However, if you are constantly taking out such loans to meet your monthly bills, then you have already jumped in quicksand. Get out before you sink in all the way!

So, if you find one or more of these signs in your life, it is time to get serious about your credit card debt. The longer you delay the worse the situation will become.

About the Author

This article is composed by Elaine McPartland who is associated with “Consolidated Credit” as their community writer. In the above article, She has mentioned worst dangerous signs that shows your debts are out of control. You can add her at her google+ profile.

photo credit: Freedigitalphotos.net

Considering Bankruptcy To Pay Off Your Debt? Here Are Some Other Options

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The topics of debt and bankruptcy are often highly debated issues, with “experts” on both ends of the spectrum. Some will tell you that if you ever have a small amount of trouble paying off debt, then bankruptcy is your answer! On the other hand, there are some who say that bankruptcy is equivalent to theft and should never be allowed.

As with most things, the answer lies somewhere in between. However, there are plenty of things that one can do before choosing to file for bankruptcy…

Cut Out All Unnecessary Expenses

If you are contemplating bankruptcy, the first thing that you need to do is evaluate your expenses. I have talked to many people over the years who are thinking about filing for bankruptcy, while at the same time enjoying many of the luxuries of life.

If you are in such a desperate situation that you are willing to turn your back on the agreements that you have made in the past, then you should first be willing to strip all of the extras out of your life.

To have a $200/month cable bill, $350/month dining out, paying tons of money for your kids to learn every instrument and sport known to man, and new(ish) cars for everyone in the household, and then claim to be too broke to make minimum payments is a joke!

Cut your budget down to the bare essentials and then attack your debt with everything that you have. This method takes sacrifice, but it will also help you to see what is really important in your life.

Sell Your Assets

If you are in a situation where your debts are growing, and it seems like you have no way out, take a financial inventory. When you want to know how to pay off debt fast, you need to look at all avenues!

Check to see if there are any accounts which you can liquidate – you may want to include your emergency fund in that analysis as well. Also, if you own property or other things of value, you may consider selling them in order to pay off a huge chunk of debt at one time.

It may be hard to sell your home or other treasured possessions, but this may provide the shot in the arm that your debt repayment plan desperately needs. Of course, if your asset is serving as collateral for a loan, you have to see how much you will get after paying off this obligation.

Earn More Money

This is another weapon in your debt repayment arsenal, which is often overlooked. You can first try to earn more money on your current job. Ask for a raise, or try to work overtime. If those options don’t work, then it may be time to search for a higher paying job!

Also, try to use your skills, hobbies, and passions to make money. You can sell the things that you design (I know several people who make good money by designing and selling jewelry), give lessons, or even start a website/blog devoted to your passions!

Talk to Your Creditors

In many cases your creditors would rather get some of the money that you owe them, rather than nothing! Therefore, they are usually willing to work out an agreement with you in order to get your debt paid. This normally happens in one of two ways.

Debt Settlement

This is an option where your creditors agree to accept a reduced amount – this can sometimes be 50% or less of the original amount due. If there is no chance that, given your current financial situation, that you can pay off the full amount that is due, this may be a viable option for both parties, then debt and bankruptcy will be a thing of the past.

Hardship Program

Many creditors have some sort of “hardship program”, which they offer to consumers who are facing financial difficulties. If, based on your overall financial situation, you can pay off your debt – but you just need a temporary break – your creditor may choose to lower your minimum payments and/or your interest rate for a certain amount of time.

For installment loans, sometimes the bank will take a few of the payments that are currently due (or due over the next few months), and add them to the end of the loan period. If you are behind on your payments at the time, this will allow you to be current in their system. Sometimes, they will actually structure these payments so that you are given a couple of months of breathing room.

These temporary hardship programs – if offered by each creditor – may be enough to allow you to take control of your finances and avoid bankruptcy.

Bankruptcy As A Last Resort

After considering and trying all of these methods, you may still be in a position where it is impossible to pay off your debts. Many times this is due to the debt that remains after a series of medical emergencies, or even when an irresponsible spouse leaves their partner with hundreds of thousands of dollars in debt! In these cases, bankruptcy may be the only way to have a normal life.

Unfortunately, it is impossible to make general statements on an issue this important and complex. Therefore, you must consider your specific financial situation with an expert before making any decisions.

photo by digitalart

What Debt Solutions Are Available?

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The following is a sponsored post on behalf of Debt Advisory Centre, exploring three debt solutions available to you (depending on your financial situation).

What debt solutions are available?

If you’re in debt, and you’re wondering what help is available, you may be glad to know that there are a variety of flexible solutions tailored to meet your needs.

Each debt solution is different, and would be appropriate for people dealing with different levels of debt. Here, we’re going to take a look at just three of the debt solutions available.

Debt Management Plan

This may be right for someone who cannot afford to keep up with their debt repayments as they agreed to in the first place, but who can repay their debts within a reasonable time frame (under different terms though).

A debt management plan works by asking an individual’s unsecured creditors to agree to changes to the original repayment plans – they may agree to accept reduced monthly payments and they may agree to freeze/reduce interest and charges on the borrower’s debt. It’s important a borrower is aware, though, that their creditors aren’t obliged to agree to any changes to the original repayment agreements.

What’s more, if they arrange to repay their debts over a longer period of time, they may pay more in the long run.

IVA (Individual Voluntary Arrangement)

This is a formal debt solution between a borrower and their unsecured creditors. It’s only available to people who cannot afford their repayments as they stand and can’t afford to repay their debt within a reasonable period of time.

A borrower must be able to commit to making regular reduced payments for the duration of the agreement (usually five years) before it can go ahead. If they can do this and the IVA goes ahead, their creditors will agree to write off the part of the debt the borrower can’t afford to pay back once the IVA reaches a successful conclusion.

An IVA will affect an individual’s credit rating – which could have an impact on the cost and/or availability of credit for six years. If the borrower is a homeowner, they may be required to release equity during the final year of the agreement. This money will be used to repay more of their debt.

Debt Consolidation Loan

This involves taking out a new loan and using it to repay your existing unsecured debts (in one go). This can make a borrower’s finances easier to manage and make it easier for them to keep on top of their repayments. If you’re thinking of taking out a debt consolidation loan, you may wish to arrange to repay it over a longer timeframe than your original debts – which can lower the amount you are required to spend each month.

[editor’s note: this is a popular item when it comes to student loan repayments]

Just bear in mind that repaying a debt more slowly can add to the overall cost, due to interest. A debt consolidation loan wouldn’t be appropriate for a borrower who can’t consolidate all their unsecured debts and/or has an erratic income.

Please bear in mind…

This article is not designed to provide a comprehensive guide to an individual’s options when it comes to clearing their debts. If you’re thinking of entering a debt solution, you should speak to a professional debt adviser before committing to anything.

Any debt solution comes with disadvantages alongside its advantages – it could affect your credit rating, for example – so it’s important you are aware of these before taking the next big step to becoming debt free.

photo by jscreationzs