Debt is an insidious thing. It can build up slowly; so slowly we aren’t even aware we have a problem until its too late. By then, we are in so much debt that all the money we do have is being used to service that debt – leaving virtually nothing to live on.
Some types of debt are unavoidable. Many people have to take out student loans if they want a college degree, for example. Then there are mortgages. If you want to buy a home, you will have to take out a mortgage. Other types of debt are definitely avoidable. Do you really need a new car on finance? Is that luxury vacation in Cancun really necessary?
Getting into Debt is Easy
It is very easy to get into debt. Society tells us we need new things all the time. From a smart new iPhone to a closet full of designer clothes, it is incredibly easy to spend, spend, spend. Credit cards are handed out like candy and personal loans are available at the drop of a hat. All you need to do is go online and fill out a form. If you have good credit, lenders will be falling over themselves to hand over money.
Unfortunately, the more you borrow, the more you have to pay back. If you are not careful, there comes a time when servicing your debts eats up all of your disposable income, and then some.
You Can’t Meet Your Repayments
Being unable to meet your repayments each month is a strong indicator your debt is getting out of control. Reputable lenders don’t lend more than their customer can afford to repay. They know that you need money to cover the bills, put food on the table, and pay your rent.
Problems typically arise when you take out loans and credit cards with multiple lenders, and not all of them are scrupulous. Payday loans are a common cause of debt problems. People borrow relatively small sums of money at exorbitant interest rates and then end up owing far more than the original loan amount.
You may also end up in a hole if you lose your job or an unexpected expense knocks your finances for six.
If you are borrowing money from one credit card to pay another, your credit score is in the doldrums, or you can’t sleep at night because you fear debt collectors will be banging on your door in the morning, it is time to accept you have a debt problem.
Facing Debt Head-On
Make an appointment with a debt coach to discuss your precarious financial situation, so find out what your options are. In Canada, a licensed insolvency trustee can provide advice and debt services to individuals and businesses. You may be able to discharge most of your debt with professional help. They will speak to your creditors on your behalf.
Don’t stick your head in the sand. Debt will not go away unless you deal with it.