Signs of Uncontrollable Debt

By Angela Monroe - March 25, 2020

More Australians than ever are borrowing money and a certain level of debt has becoming relatively common especially amongst those needing to make big purchases such as a home or a new car, or paying for big life events such as a wedding.

It’s important to realise when debt becomes to get out of control though. If you’ve got a bad credit score, you need to be especially careful about keeping your finances on track and making sure your debt doesn’t spiral to a point where you’re simply unable to pay back what you owe. Having bad credit doesn’t have to mean financial disaster but keeping debt under control is key to healthy finances.

It’s certainly not the case that you can’t have any debt. Often getting into debt is inevitable and actually allows you to progress longer-term by getting on the property ladder or having the transport to get to and from your job each day. Knowing how to spot when debt escalates to an uncontrollable level though will really help you to avoid getting into financial difficulty and worsening a bad credit score.

How to spot the signs of uncontrollable debt            

Keep an eye on your debts and know the signs you’re facing uncontrollable debt. This can help you to take action before you end up with problems that can be stressful and expensive to resolve. Some of the signs that you have uncontrollable debt include:

1. You’re unable to make minimum payments

When you take out any type of loan, you’ll have minimum payments that you’re expected to make on time and in full each month. This is part of the loan agreement and if you can’t make the minimum payments you’ll default on the loan. This will be noted on your credit history, which can lead to a bad credit score and will affect your chance with future lenders. Getting a loan with bad credit isn’t impossible, but it can be harder if you haven’t been able to make minimum repayments in the past.

How to change it: Not making your minimum repayments can be stressful, but there are ways to improve things. You could speak directly to your lender about the issues that you’re having and work with them to either lower the repayments or find a loan that’s better suited to you. The other option could be to take on extra work, or part-time shifts to ensure you can make your payments on time.

2. Your credit score is very low

Uncontrollable debt could mean that you’ve made late payments, defaulted on current loans that you have and generally have black marks on your credit history. This can lead to a bad credit score that is continually dropping. When you’re debt gets out of control, your credit score will be affected and this can affect your chances of borrowing money in the future.

How to change it: There are lots of ways to improve your credit scores. Have a look at all the debts that you currently owe and try to be as honest as possible about your financial situation. Write down what monthly income you have and all of your expenses. Drawing up a budget and figuring out where your money is going and how it could be redirected will help you to understand your finances. This can help you to allocate money to loans that need to be paid back on time and in full.

3. Your debt just keeps growing

Debt can be a really vicious cycle. Many people find themselves actually borrowing more money to pay off existing debts, which then leads them getting into more financial trouble and further damaging their bad credit score. If your debt just seems to keep growing, things could be getting out of control. Often this is due to the charges that you’ll be getting on your existing debts, which can be really high and add on a significant amount to the original loan.

How to change it: It’s really important that you address this issue as soon as possible and don’t just bury your head in the sand. Act as quickly as possible to stop the cycle and deal with the debts that you have. Figure out which are your biggest and most costly debts, and prioritise paying off these first. There are different methods of tackling debt so do a little research to find the best option for you.

4. You live paycheck to paycheck

If you’re currently living paycheck to paycheck, barely getting by each month, you’re likely to also have a bad credit score. This isn’t your biggest problem however because if you don’t have any spare cash at the end of the month, you simply won’t be able to deal with an unexpected financial emergency such as essential car repairs or medical costs. This is not a good position to be in and you need to address your bad credit situation.

How to change it: look carefully at your budget. Figure out exactly what your income is, then see what you’re spending each month and where your biggest expenses are. You need to be living within your means and saving money wherever possible. You may want to look at a lender who specialises in helping people with bad credit to move some of your loans to better rates of interest or to get help finding better loan terms.

5. You’ve had debt collectors visiting

This can be really scary – especially if you have a family or dependents living in your home who you need to provide for. Having debt collectors visiting your home is the ultimate sign that you have uncontrollable debts and that you need expert help as soon as possible. The reason that debt collectors will visit your home is that you have unpaid debts and have failed to adhere to the terms of a loan agreement. You could risk losing assets such as your car or your home.

How to change it: you need to get expert help. You can’t get rid of your debts overnight, but finding a lender who specialises in people with bad credit will help you to take the first steps back onto a better financial path.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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