When Is It Time To Get Your Debt In Control?

Debt Management

When it comes to debt, people have always wanted to take the easy way out. This belief has led many individuals to experience spiraling out of control and getting more debts as much as they possibly can to get out of the old debts.

While debts are inevitable, there are a lot of unnecessary loans, and people would need to remove themselves from that situation. If you are not sure about where you stand in all this financial talk, then some signs may point out when it is already time for you to get your debt in control and act as quickly as possible.

What Are The Signs?

First, you should start looking at and calculating your debt ratio. Your debt ratio is the total amount that you have to repay each month in comparison to all of your debts.

Think of this situation as a pie. If you have a credit limit of up to 100% and you eat up a slice of it consisting of only 25%, then you should continue to have a 75% credit availability which is not bad at all as this is a good number. But what if you do not just eat a slice of the pie? It becomes harder for you to control your needs and how you can pay off your debts.

Another example is if you earn around S$4,000 a month. Maybe you have a loan that comes up to around S$3,200. This means that if you are to pay your debt in full, that should leave you with around S$800 a month for you to pay for your needs and your wants. This is a big problem since you are not going to be able to live with just that amount every month, so you do not pay off your debt in full. The next month will come, and you will have to repay the remaining loan plus the added interest on financing that the credit card companies impose. Eventually, you end up with paying interest a month and not being able to pay the principal.

What can you do to get out of this debt? If you are in this predicament, you would need to put yourself in a position where you can do the following:

●    Approach a credit counseling service for help as soon as you can. They can help you get the right financial assistance that you need to prevent the situation from getting worse.

●    If you have a debt ratio of more than 100% of your monthly income, you should have a debt restructuring plan where you can restructure that debt and have the help that you need.

On top of that, when you have credit requests that are being rejected continuously, it should be a sign that you are definitely not in a good financial place from the point of view of the banks and the financial institutions. When you have a credit score that is not pleasing to these financial institutions, you will end up having a lot of problems when it comes to your debt.

The credit score is a depiction of your repayment history and the various credit facilities that you currently have. If you have a bad or poor credit score, you will end up in a difficult position where you do not get approved for any debt or loan.

How do you get out of this? In order for you to get out of this predicament, you need to get a cheaper loan so you can pay off the old one. Some individuals use this technique where they get a personal loan at a 6% interest to pay off the loan than just paying off the credit card loan at 24%.

Another sign that you should look out for is when you cannot afford to pay more than the minimum amount of your debt. If you are already in a position where you can no longer pay your obligations because they already exceed your income, you must get your debt restructured. The minimum payment does not need to be the amount that is put on the bill, but it should be the amount that you must pay off to pay your debt. Instead of just paying off the minimum of $50 a month, go beyond that and pay off $60 or $70 if you can.

You must also be able to have more self-control when it comes to choosing between your basic necessities and debt repayments. If you really want to get out of your debt, you must be able to control your spending for a little bit of time. Once you pay off the debt that you have, you will eventually have that extra money to spend on the things that you want because you are out of debt. The point is that you should look forward to something more and more long term at that. Once you do, you realize that getting out of debt will give you more freedom than you can imagine.

If you cannot even make the repayments anymore, then you may be in trouble. You need to have a sense of self-control where your debts do not get unpaid for 90 days. Consider yourself lucky that once you consider this as a reality of your finances. Know what your situation is so you can have a better handle of it and so much more than what you can imagine.

You Have Control Over The Problem

The problem is simple, and the solution is simple, as well. The sooner that you contact a credit counseling service, the sooner that you can have control over the problem. The sooner that you can get out of debt, the more financial freedom that you would get. Two to three months of self-control can get you into a long way of financial freedom.