How to recognise problem debt

What’s the difference between debt and problem debt?

Lots of people have debts, this isn’t something that’s necessarily a problem. Mortgages, loans, credit card balances – these are debts that anyone can have. But when do debts become problem debts, and how do we recognise that our debts are becoming problem debts?

The difference between debt and problem debt is generally the ability to repay. Debt becomes a problem when you’re struggling, or unable, to make repayments and are living on a paycheck-to-paycheck basis.

Ask yourself the following questions:

Do you pay for non-essential items on credit cards – as a necessity, rather than a credit rating building measure? If so, this can sometimes be a sign that you’re using all your available cash (wages) to pay for bills; rent/mortgage, council tax, utility bills etc. and are left out of cash when you’ve paid all your minimum repayments. Therefore, leaving you reliant on your credit cards to pay for food shopping etc.

Do you juggle debts from one card to another?

If you’ve answered ‘yes’ to either of these questions, you could be facing what will, or has, become problem debt, in the ‘debt cycle’.

What are the signs of problem debt?

In addition to over-reliance on credit cards, there can be many warning signs of problem debt.

You don’t know how much debt you have

If you don’t know how much debt you’re in, you may have a serious issue. Living paycheck to paycheck whilst juggling debts that amount to who knows how much is a sure sign of debts being a problem.

How can you get your problem debt situation under control if you don’t know how much you owe and to whom?

Struggling to pay bills

If you have little to no cash left once you’ve paid all your bills and debt repayments every month – or worse, you run out of cash before you pay all these – then it’s highly likely that your debt is unsustainable and has become a problem.

Living in your overdraft

Sound familiar? If you’re living in your overdraft, then it’s highly likely that you’re spending more than you’re earning each month. This can be a sign that you’re in a problematic debt cycle and leave you worrying about making ends meet once all your outgoings are accounted for.

Only paying minimum payments on your credit cards

If you’re spending a lot on your credit cards, but are only paying the minimum repayment amount each month, then it’s likely that not only is the amount you owe slowly getting bigger, but you’re also spending more than you can afford to spend; resulting in a situation where debt is a problem.

Gambling to try and get out of debt

This is a big one. If this sounds familiar, then you really should get debt advice and see what debt help is out there for you.

Gambling costs money. Chasing a big win (the odds of which are – obviously – stacked in the bookies’ favour) to get you out of debt is never a good idea. It can lead to spiralling costs as you put more bets on and could even leave you with both crippling debts and a gambling addiction.

Hiding your debts from your partner

If you’re in debt to the point that you’re hiding it from your significant other, then you already know you have a problem. It won’t go away by hiding it or hiding from it. You need to take action to get yourself free debt advice and create a plan to get yourself out of debt.

You should probably talk to your partner, as well.

How can you address the problem?

Admitting to yourself that you have a problem is half of the battle. That, and realising that you’re not alone; problem debt can happen to anyone.

Once you’ve realised that you’re stuck in the debt cycle and your debt levels aren’t sustainable, the next step is to talk to someone and get help. There are a variety of options available, from Scottish Trust Deeds, to Debt Arrangement Schemes or Minimal Asset Processes, getting free debt advice and finding the debt solution that’s right for you is an important step to take to help you to start the journey to a debt free future.

If any of the signs of problem debt in this article sound at all familiar to you, complete our 30 second form and we’ll call you with free, no obligation debt advice.

Don’t bury your head in the sand, start your journey to debt-free today.