Many people who use
credit do not realize they have a debt problem until it is too late. For young
credit users, it may be even more difficult to recognize debt trouble because
borrowing is still new to them.
You may be on the road
to a debt problem if you have to borrow money to meet your basic needs.
Unfortunately, it is not uncommon today for people to use credit cards to pay
for groceries because their monthly income is not enough to cover their basic
needs. This will lead to a debt problem.
Credit card debt is likely
to become a burden if you see yourself applying for a new credit card every few
months. While you may still be in good standing with all your lenders, it is
never a good sign when you have to make only minimum payments to some just so
you can pay down the debt from another. It is even worse if you are using
borrowed money to pay off other debts.
You likely have too much
debt if you can only manage minimum payments to your creditors. Although minimum
payments keep your credit accounts in good standing, the interest on your debt
will continue to rack up and increase the total amount that you will have to
pay. It may soon become impossible to pay off the debt.
By knowing how to spot a
growing debt problem, you will be able to make spending changes to get yourself
back on track. You may try debt-management strategies such as cutting down on
nonessential spending, paying more than the minimum payment each month, and
using cash instead of credit for convenience purchases. (Debit cards may be a
problem because consumer protections are not as good for them as for credit
cards, but that is another story.) If all else fails to alleviate your
substantial debt burden, you may be able to work with your creditors to
negotiate a new payment plan or a lower interest rate. Nonprofit consumer
credit counseling services can also work with you and your creditors and help
you set up a payment plan to pay off your debts.
READERS, what
do you think?
Is it likely that many
people do not notice they have a debt problem? If so, why?
If you thought a friend
had a debt problem, how would you tell them?
Reference:
Editors of Kiplinger’s
Personal Finance magazine. (2014, January). Warning signs of too much debt. Kiplinger. Retrieved February 7, 2014,
from http://www.kiplinger.com/article/credit/T025-C000-S001-warning-signs-of-too-much-debt.html.
