It is always suggested to make proper repayment plans before you start receiving harassing collection calls. But how would you understand when to take debt help?
Certain warning signs alert you earlier enough about the upcoming conditions.
1 Standard of Living
You use credit cards for buying almost everything
Explanation: You usually don't carry cash and swipe cards for buying everything.
How frequently do you call up and request for change of appointment dates with your doctor because you can't pay the bill
Explanation: You have to reschedule your doctor's appointment since you can't make the copayment or pay the bill.
You regret buying certain things
Explanation: You buy something now without thinking and regret later for purchasing that.
Do you have any emergency account?
Explanation: You don't save anything for financial emergency.
2 Purchase Capacity
What is your debt-to-income ratio?
Explanation: Debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes towards your debt payments (like monthly mortgage, car loan, student loan, credit card payment, etc.).
Your mortgage lender has offered loan with relatively more interest rate than the current market rate
Explanation: The interest rate on your mortgage is comparatively high, which may increase your monthly mortgage payments.
3 Bill Payments
A sudden expense doesn't allow you to pay all your monthly bills and you have to select some bills to make minimum/required payment
Example: Your expenses were more on your last vacation than what you planned in your budget, and so you can't pay all your bills of this month.
You're making payments on a purchase which you bought:
Example: Suppose you bought an item (by swiping your credit card) a few months back and still paying your credit card bills.
You usually revolve your credit card payments from one cycle to another by making only minimum payments
Explanation: Usually you don't repay your entire credit card bill at the next payment date and pay the minimum amount or a little extra.
You're facing difficulty to manage your multiple bills
Explanation: Often you forget the payment due dates of your multiple bills or can't make the outstanding payment on all bills even if you wish to do so.
4 Monthly Budget
You always try to save at least 10% of your paycheck.
Example: If you earn $5,000 in a month, you should save at least $500 in that month.
At the end of the month, you're able to save __ of your paycheck:
Explanation: Calculate from your budget worksheets, on an average, how much you've been able to save in the last 6 months.
5 Debt Scenario
Are your debts mostly of:
Explanation: Do you owe money on payday loans, cash advances, personal loans, credit cards or you just have to make payment on mortgage, car loan or other secured loans.
You reach almost the credit limit on most of your cards
Example: Suppose the credit limit on one of your cards is $50,000 and you swipe your card for almost that amount.
6 General Feelings
You are stressed about your financial situation
Explanation: You are worried about how you will build a secure financial future.
Do you feel the need to get help to manage your finances better?
Explanation: Do you think you need professional help to manage your finances?