There’s a fine line between “living with debt” and “drowning under debt.” The truth is, sometimes it can be very difficult to know when you’ve crossed it. You might find yourself wondering whether you should try to handle your debt on your own or whether it’s time to consider debt relief options.
Everyone’s case is different, of course. The amount and type of debt will affect your course of action. But here are five signs it’s at least time to do some research to figure out which debt relief solutions could help you get control of your existing debt.
#1: Even extreme budgeting won’t fix your debt in five years.
According to NerdWallet, it’s time to seek debt relief if “you have no hope of repaying unsecured debt” even if you do all you can to slash spending. Credit card balances, medical bills and personal loans all qualify as unsecured debt.
So, if even the most drastic budgeting efforts will fall short of helping you eliminate your debt in five years, it’s time to start exploring your options.
You may decide to seek out a debt management plan (DMP) through a credit counseling agency, which can earn you more favorable terms on your debt while you’re paying it back at a steady rate over time.
You might find credit consolidation to be your best bet, meaning you’ll take out a loan and use it to pay off high-interest debts. Then you’re responsible for repaying this loan in full over time.
Consumers who owe more than $10,000 or so might decide on debt settlement because there’s the chance creditors will negotiate—meaning you may be able to zero out your balances for less.
There’s really no convenient one-size-fits-all way to get rid of debt. Once you decide you need help with debt, the next step is evaluating the pros and cons of each option so you can choose the best.
#2: Minimum payments are becoming your maximum payment.
Minimum payments are exactly what they sound like—the absolute least you can pay on a balance without accruing late fees or slipping into delinquency. If you find yourself struggling to stay current on minimum payments, whether they’re a fixed fee or a percentage of your outstanding balance, it may be time to take a different tack.
If the minimum payment is the most you can pay each month, or if you’re starting to fall behind on this benchmark, it’s worth considering debt relief. That’s what happened to one consumer, as she wrote in a Freedom Debt Relief review: “…I decided to go through the program because I have been trying to pay the credit cards, but I’m only capable of paying the minimum payment and it was getting me nowhere. I needed help getting down the bills…”
Paying the minimum or less is no better than treading water. It’s not a solution in the same way debt relief is. So, if this sign sounds like you, explore your options.
#3: You’re seriously considering filing for bankruptcy.
In extreme cases, consumers have little choice but to file for bankruptcy, which acts as a financial clean slate of sorts. However, there are serious consequences for doing so, like a stain on your credit score for years to come. You may also have to give up some or all of your assets.
Think of bankruptcy as a last resort rather than a front-line solution.
#4: You’re dodging debt collectors left and right.
Do you wince every time the phone rings? Does seeing a letter in your mailbox spark anxiety? If you’re facing persistent debt collectors left and right without a solution in sight, debt relief may be the best route to, well, relief.
#5: You need credit cards just to float living expenses.
Are you buying groceries and other essentials on credit without the ability to pay your balance in full at the end of the month? If credit’s keeping you afloat, you’re in dangerous territory. Now is the time to figure out how to eliminate your debt and get a handle on your spending, before it’s too late.
If any of these five signs sound mighty familiar to you, it’s time to consider your debt relief options.
