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You're in debt: And there's so much that you need to know

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By: tiarajoseph11
on 30th Dec,2015

Here are the things which will help you to know your debts and understand them properly.

If you have currently discovered yourself in the middle of a debt trap, you’re probably going to wish that all of it must disappear. But, you should also remember that taking the first step to understanding your debts is important. More importantly, you need to prepare a plan to get rid of them as soon as possible.

So do you know how much debt is too much for you? Is it $20,000 in credit cards or a $200,000 in student loans? The answer is totally depending on your personal situations, but there are certain things, which can point out that you may have too much debt in your pocket. Let's put some light on those things and know them:

1. You’ve no idea how much you've gathered as debts

It’s not a big deal whether you have $2,000 debt on credit cards or you have $20,000. The main thing is that you need to know your debts. If you don’t, then there’s a possibility that you may increase your debts even more. If you don’t gather enough funds to pay your debt fully, you should still need to know how much you owe to your creditors.

You’ll definitely need help if you feel that you’ve reached a point where you have ignored debt problems or you don’t know how to keep track. If you don’t pay the minimum amount regularly, it can affect the credit score badly. Set some time to check all the debts you owe and those interest rates you are dealing with.

2.You’ve no plans to pay off the debts

Too much debt can hamper your finances, and you can’t do anything to change your situation. You’ll be in a big trouble if you feel that you are regularly missing your payments. You must do whatever it takes to pay off those debts by minimum payments or using tax refund to pay off more. You might have to talk to the lenders and request them to modify the terms and regulations. If you don’t form a plan, your debt amount may increase day-by-day. You can opt for debt management service; it’s manageable and easy.

3. You can’t afford your bills

If you can’t afford the incoming bills months after months, your debt will get out of your hand. It is tough to handle a huge load of debts when you are experiencing some financial hardships like unemployment. Most debts involve a regular, minimum payments. If you are getting the bills, but you don’t have the guts to pay them off, it’s the time to reduce them at least. On the other hand, if you are paying your bills fully after crossing the due date, it’ll cause you more trouble. Paying late will generate fines and penalties on your account, and your credit score will be getting lower with the increasing rate of interest.

4. You can’t live a stress-free life

After knowing and making a plan to repay your debts, you might be still terrified of the coming situation. If you are constantly stressed due to that huge debt burden and critical financial situation, then that can be painful. Thinking about your financial hardship is natural. But, if it gets on your mind all the time, that can hamper your daily life. Your relationships with others will be ruined, as well as your health and peace of mind.

This sign is less obvious than the others because different people act differently in different situations. However, when you’re constantly thinking about your debts, it makes you fearful and depressed. So, you need to manage your debts or pay your debts as soon as possible.

5. You've nothing as savings

You will do it wrong if you pay off your current debts by using any other credit cards. If you’ve to pay with a new credit card, then it is expected that your financial situation is beyond your reach. New credit card will charge higher interest rates on your new debts. This option is ok once in awhile, but not for long-term purpose. Yes, you’ll be in grave danger if you put yourself in more debts. You can’t regularly borrow cash from your relatives or other people.

Read more: Credit card debt: How financially-savvy people avoid that

Another similar sign is that if you have used all your savings and you don’t have an emergency fund, then you definitely have too much debt. Lastly, if you don’t have any money left to buy your necessities and pay your utilities, then you clearly have too much debt. There is no certain amount that can be called “too much debt”, it’s up to your financial behaviors. If you are experiencing several of the above signs, you probably need to reevaluate your debt situation.

After you repay your debts, it’s the time to plan your financial life accordingly to secure your financial life. Know how to plan your finances after paying off your debts.

Don’t miss out: 10 Secrets to avoid debt lag during the holidays in 2015

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