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Debt problems are accompanied by warning signs
Tens of thousands of Americans have problems with debt, mostly piled up on credit cards. Often, the debt becomes so large that the consumer has no choice but to file for relief through bankruptcy. These things don’t happen suddenly, though. There are always warning signs that the amount you owe may be getting out of hand. We will look at these signs and see what they mean.
Read on.
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Problem debt doesn’t happen overnight
The amount of money that the typical consumer owes at any given time has been rapidly increasing during the last ten years. Aside from car loans and mortgages, which take up a large portion of our financial obligations, many Americans also owe a staggering amount of money on their credit cards. This is partly due to the convenience of using the cards, which can now be used in places where you couldn’t use them in the past, such as the Internet or at fast food restaurants, but also due to the fact that lenders have made them much easier to obtain than they were in the past. Twenty years ago, it took a pretty solid history of credit in order to obtain a Visa or Mastercard. Now all it takes is a high school diploma. Banks are handing the cards out to just about everyone now, and everyone is using them to become knee-deep in financial obligations.
While bankruptcy filings are up and the average amount of credit card balances have increased to nearly $10,000, this doesn’t happen overnight. Most people accrue those bills over time through careless use and even more careless methods of paying the bills. Most of the time, once you realize that you owe more than you can repay, it’s too late.
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Here are a few signs that may indicate that your debt problems are out of control:
- Your savings account is empty. Financial experts recommend that you keep three to six months of savings on hand for emergency use. If you have zero, that could be a problem. You should be saving something every month.
- You make only minimum payments on your credit cards. Paying only the minimum will insure that you keep your debt for decades, as it takes forever to pay off even the smallest bills by paying only the minimum.
- You aren’t using cash anymore for such trivial things as movie tickets, fast food and groceries. If you aren’t paying your bills in full every month, then you are paying as much as 30% interest on those movie tickets!
- You have one or more credit card accounts that are at, near, or over their limit.
- You are borrowing money from one account to make payments on another account.
- You have no idea how much you owe on your accounts.
- You are making payments late. This makes a bad situation worse, as it allows your lenders to raise your interest rates and assess late fees, which can easily amount to $39 or more.
Each of the above items is a problem in itself, but if you find that more than one of those things describes you then you may have a problem. It doesn’t mean your situation is hopeless, but it does mean that you need to sit back and assess your situation carefully. You could be heading towards a bankruptcy filing, and that means more expenses, ten years of black marks on your credit report, and difficulty obtaining loans at reasonable rates in the future. Take a look at your situation. If you can’t make sense of it, you may wish to discuss your finances with a credit counselor.
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