The truth about bankruptcy
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Are you edging towards problem debt? If not, read on to see how to spot the danger signs.
Do you know how far away from problem debt you are? If you don’t keep a regular check on your finances, you may find that your debts start to spin out of control before you’ve even realised it. But, the warning signs of problem debt are usually obvious for quite some time before you actually start to struggle. So what should you be on the lookout for?
1. Ignoring letters, calls and emails from your lenders or creditor
This is one of the big warning signs and, if you’ve started doing this, it makes sense to take stock of your finances before they become a real issue. Why is this so bad? Well, if you don’t know where you are up to with what you owe, you are burying your head in the sand, and that’s never a good thing.Often when people start to realise that they might be in financial difficulties, they don’t want to admit to it and so ignore contact from their lenders and creditors. This is usually because deep down you know the letters will be about missed, late or part payments and if you open the letters, and admit to the situation, it makes it real. Does this sound like you or someone you know? If it does, you should seek debt help as soon as possible. It may be hard to accept you’re in financial difficulties, but once you have, the process of getting yourself back on track can begin.
2. Feeling worried about money
Do you lie awake at night worrying about where you’re going to get the money from to pay for the shopping this week? Do you feel like all you do is work to pay off your bills each month, and still you’re only just managing it? If you do, it may be time to sit down and have a proper look at your finances. No one wants to live life in a state of stress and it may be that just a few adjustments to your budget will do the trick. So, we’d advise doing that first. You can find out the state of your finances by keeping a spending diary and creating a budget so you can see what you’ve got coming in and going out. If you’re not sure how to do this, we have a two-part blog that covers everything, so why not have a read of that first – Are you leaking money – part 1 and Are you leaking money – part 2
If you feel it’s gone further than that already and you have problem debt, or you can’t cope with sorting it all out, it may be time to think about speaking to a debt advisor. We’re here to help, all you need to do is talk to us. Once you do, you’ll feel so much better about it.
3. Being rejected when you apply for further credit
Have you applied for credit recently only to find that you’re being rejected? If you have, it may be time to have a look at just how much debt you have. Why? Well there are few reasons why your application might be rejected – for example lenders will assess if you can afford the repayments for the new credit you’ve applied for, and if they think you can’t they could turn you down. They will also look at your credit history and they will see if you’ve missed payments on the credit you’ve already got, or paid late or in part. Depending on the lender, if they can see that you already struggling to repay your existing borrowing they may they may decide not to lend you anything more. Whatever, the reason being rejected in credit is a signal that it may be time to review the borrowing you already have.
4. Only making minimum payments towards your credit card balance each month
Making the minimum payment on your credit card can be great if you’re a little short one month, but if you find that you’re only ever able to make minimum payments on your cards, you should have a look at what’s going on with your finances. The problem with minimum payments is they extend the time it takes to pay off your credit card balance for many months or even years and you end up paying lots of extra interest as a result. So, you should always try to make more than the minimum payments if you can.
If you’re struggling to do even that, it’s time to get some help. Don’t let the situation progress to the point where you’re not making payments or you’re sending payments late, as this will have a damaging effect on your credit file and may lead to you getting extra charges added to your balance moving you further into debt. If this sounds like you, why not call a debt advisor and chat about how you can start to solve the problem.
5. Using credit to pay for essentials
If you are borrowing to pay for food, essential bills like rent, electricity, gas or your council tax this can be a warning sign. Don’t get us wrong – using a credit card to tide you over from time to time is fine. But, if you get to the point of needing to borrow money every month just to survive, there’s a problem. And if you find that you need to borrow money to make the repayments on some of your existing debts that’s also a warning sign.
And it’s not just credit cards you need to worry about, you should also be careful about payday loans too. Again, they may have their place, and in certain circumstances they can be useful. But they are not meant, and were never designed, to be used on a regular basis because it’s an expensive way of borrowing.
Again, if this sounds like you or somebody you know, it’s time to take stock of the situation and explore options that can help you improve your finances. If you’d like help with that, we’re here. Just use one of the contact us buttons on the left of the page.
If you would like to explore the idea of using a debt solution to resolve your financial worries, it’s definitely a great first step towards getting your finances back under control. However, debt solutions are not a wonder cure, and they come with some side effects, such as affecting your credit score, which can make it more difficult for you to gain credit in the future. If you are considering a debt solution your debt advisor we talk you through all pros and cons of the solution they recommend to help you decide on what is best for you. Why not have a chat with us and see how we can help you?
by Shelley BowersBack to blog home