Do You Have Debt Problems?

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Do you have debt problems

Do you have debt problems that keep you up late at night? If so, you aren’t alone, as Americans have accumulated $14 trillion in consumer debt in 2019. 

There may be other signs that your financial situation is in danger, so keeping track of them is imperative. More importantly, there are several measures you may take to solve debt problems.

What is Debt?

Debt is simply putting off delivering your end of an exchange, so it doesn’t need to involve money. In ancient times, people used to trade goods with each other, and they owed debt when they delayed providing their side of the deal. Nowadays, we have debt in the form of credit, meaning “he believes” in Latin. We borrow money from lenders who “believe” we will return it.

We have now conflated debt and credit into one, as we get credit card debts for our needs and desires. For instance, many take out student loans in exchange for an education. Unfortunately, poor spending habits have become a monumental financial problem for many. In fact, many have developed psychological problems such as insomnia and anxiety because of it.

The impact of severe financial straits can be disastrous, so looking out for them is important. To solve debt problems, you must first understand them. Of course, a constant feeling of distress from money problems is a telltale sign. However, other poor spending habits may reveal your debt dilemmas, such as overspending and failing credit applications.

Warning Signs of Debt Problems

Exclamation point warning about debt problems

If you excessively rely on debt for most of your spending, that’s a big red flag for extreme debt problems. It may have wreaked havoc on your credit report, so lenders may have rejected your loan and credit applications. 

This may have led you to request your card issuer for cash advances while completing only the minimum for monthly payments.

Overspending

Some people spend exorbitant amounts on myriad purchases, sinking them deep into debt. This may have drained peoples’ funds dry until barely anything is left for necessities. As a result, they had to borrow money for their essentials, or worse, for bills. Consequently, they had to contend with ballooning interest for months or even years.

To determine if you’re overspending or not, you must create a budget. Gather all your billing statements, receipts, and other payment records. Then, sum up your payments and deduct them from your income. If what’s left is not enough for an emergency fund or savings, then you may have major debt problems.

Denied Credit

Credit application denied due to debt problems

If you attempted to apply for a loan and received a rejection, you may have problems with debt. This was probably due to your poor credit rating, perhaps scoring 650 or lower. 

This three-digit number can make or break deals for specific essential services, such as student loans, auto loans, and mortgages. In fact, some employers may decline your job application due to bad credit.

Your credit report shows how efficient and responsible you are in handling your finances. If you’re creditworthy, this inclines lenders to accept your loan applications and even provide lenient terms. In general, your credit worsens when you have excessive debt. This is why you must solve debt problems as soon as possible!

Late or Minimum Payments

Making minimum payments delays debt payoff, but it isn’t a certain sign of debt problems. However, it’s a major indication if you’re paying the minimum due to insufficient funds. 

In fact, you may have missed payment deadlines due to the lack of money. Your debt problems may then hinder you from reliably affording your necessities, so these should raise your concern.

Cash Advances

Lastly, you may have been frequently taking out cash advances from credit cards. This is a harmful money habit as it leaves you prone to exorbitant interest rates, especially if you fail to pay them back. 

Of course, it’s valid for certain emergencies such as medical bills after an accident. However, you have severe debt problems if you rely on them to stay afloat.

How to Solve Debt Problems

Cascading dominoes stopped to illustrate solving debt problems

After knowing the various signs of debt dilemmas, it’s time to take debt solutions. Fortunately, methods such as credit counseling, debt consolidation, and debt settlement may help you become debt-free. Most importantly, frugal and wise spending habits is the best way to prevent having debt problems.

Credit Counseling

This involves speaking with a certified credit counselor for financial advice. They will assess your financial records, and may even provide a debt management program specific to your situation. 

Moreover, they may negotiate with your lenders to give you more time to pay them back. Counseling services usually include lessons for better money management.

Debt Consolidation

Consolidation loans are used to pay the combination of all your debts. This leaves you with a singular loan that has a lower interest rate, so you may proceed with debt payoff easier. 

These can be taken out as a personal loan, or you may use a balance transfer credit card. Take note that the terms still depend on your credit rating.

Debt Settlement

Hands exchanging money for debt settlement fees

Another way to solve debt problems is by debt settlement. You may ask a debt relief company to negotiate reduced debt with your lenders. Meanwhile, you must ignore debt collection calls, and save money in an escrow account. This fund will be used to pay the agreed amount your settlement company is negotiating.

Save enough, ignore your debt collectors, and wait until you receive an offer. If the settlement company succeeds, they’ll send you the offer that you must pay with the escrow funds completely. However, take note that your lenders may refuse to settle your debts. Also, this may cause temporary damage to your credit report.

Wise Money Habits

Finally, you must spend frugally and wisely by only spending on things you need. The occasional smartphone purchase is fine, but prioritize saving for emergencies. 

Write a budget, so you can keep track of your spending. The best way to solve debt problems is also to prevent them from happening in the first place.