It’s often perceived that credit is good and debt is bad. However, every year good credit goes bad for thousands of people. Borrowing money can help you achieve your personal objectives, such as home improvements, but we explore some of the signs that you could have a debt problem because of troublesome credit.

For most people that get into debt they tell us “I wish I had something to show for the debt”. The reason most people don’t have a luxury house, designer clothes or have travelled the world on credit is because that rarely happens.

Credit is frequently used as a “buy now and pay it later” financial service. But, along the way, it’s not uncommon for people to struggle with their once affordable credit commitments.

Reasons For Debt Problems

There are numerous reasons why a person can find themselves struggling to manage their credit commitments. Nobody ever wants to be in debt, so why does it happen?

  1. Loss of Income: During a period of unemployment many people turn to a line of credit to survive. If the unemployment continues for longer than anticipated then the debts continue to mount.
  2. Separation / Divorce: A change in circumstances, such as separation or divorce, can create a debt problem. The cost of living in a couple is often more affordable as the bills are split. This is particularly true when the debt existed while in the relationship and you’re trying to repay the money borrowed at the same time as managing your enhanced expenditure.
  3. Consistent overspending:  The intent when borrowing money is always to repay it. However, debt can grow and become unmanageable.
  4. Unexpected repayments: Many benefits, among other debts, can be overpaid in error and repaying these can be difficult. Typically, repayment plans can be setup so the debt can be repaid, but if the repayment period is too long a debt solution may be required.

Debt Problem: What are the signs?

On average, it takes 7 years of accruing debt and a year of struggling to make the monthly payments, before it becomes impossible and people seek debt help.  There are signs that you may be struggling with your debt and these are our top 5:

  1. Minimum payments: Making minimal payments towards debts because that’s all you can afford is a sign you need debt help.
  2. Feeling of dread: When the bills arrive through the door do you fear opening them, so they mount in a corner? Many people in debt feel unable to open bills when they know their debt has become unmanageable.
  3. Credit to survive: Continually using credit to pay for food or living costs because your salary and income is used to pay debt is a sign you could need debt advice.
  4. Consistently balance transferring: Using the balance transfer with interest free period features of a credit card is an excellent route to repay debt, without having to pay interest. However, if you’re balance transferring and continuing to make the minimum payments then the debt isn’t going anywhere.
  5. Family and Friends: If you’ve stopped socialising with friends and arguments with family are increasing, this could be a sign of debt and money worries.
  6. At Night: Is your debt often the last thing you think about before bed and the first thing you think about in the morning?

How to Deal with Debt?

Once you know you have a debt problem you can always speak to a debt advice charity like Debt Support Trust. However, if you don’t feel ready to talk to anybody about your money worries you can complete a statement of affairs.

Your statement of affairs considers your monthly income and then what your expenditure is for essential items like food, mortgage/ rent, council tax and travel.

In a separate column, list the companies you owe money to and a rough balance. If you have any assets like stocks, shares, bonds or equity in your house you should list these under assets.

Once you’ve completed this process you will know how much your cost of living is each month and how much money you have available to repay towards debts.  You can speak to a debt advisor at Debt Support Trust who will be able to talk you through all of your options.

Alternatively, you can complete the debt analyser online which summarises your income, expenditure, assets and debts.