How Much Debt is Too Much?
Are you in a situation where you have no idea where exactly your credit stands and how much debt you have? Then a bell must ring: you probably have too much debt. Most people have some debt, but too much credit card debt is not good. In fact, in the United States, the average debt per household stands at $5,700 (2019). But where exactly does the threshold lie; when do you have too much debt? Read on to learn about the signs that you may have too much debt to handle.
You Can No Longer Apply for A Loan If You Have A Lot of Debt
How much credit card debt is too much? For example, if your car loan and credit card payments are $600 per month, and you make $5,000 per month (before taxes), your DTI ratio would be 12%. If your DTI calculation is close to or over 20%, you will likely carry too much credit card debt.
When you submit a loan application for a mortgage, personal loan, credit card, or another type of loan, but it is declined, it may be time to sort out your debts. Either the financial institution believes that you do not have the financial means to take out credit or you have been blacklisted. If you have payment arrears for several months, the lender is obliged to notify the Consumer Financial Protection Bureau within two working days. If you are on this list, you must first repay your overdue debts before you can take out new credit.
Pay attention because if you do not repay these debts, the financial institution in question may possibly seize your wages or other movable property, or even your house with a mortgage loan.
You Do Not Have an Overview of Your Debts
Do you know that you are in too much debt, but you have no idea who you owe or how much? Then it is time to no longer walk away from these issues, but to tackle them. Make a clear overview of your debts: with whom you contracted a debt, for how much, and when exactly? Then, look at each loan term and at what interest you have taken out this loan. Yes, it might be confronting and overwhelming, but it’s time you got down to paying off your debts. You’re not alone, though. On average, Americans carry $6,194 in individual credit card debt, according to the 2019 Experian Consumer Credit Review. Moreover, an Experian 2019 Consumer Debt Study analyzed and showed the average debt by age in the United States:
|Age Group||Average Debt|
|18–23 (Generation Z)||$9,593|
|40–55 (Generation X)||$135,841|
|56–74 (Baby Boomers)||$96,984|
|75 and above (Silent Generation)||$40,925|
You Are No Longer Able to Pay Your Bills
Your electricity is cut off, or you can no longer make calls because you have not paid your bill. It is probably not the case that you do not want to pay your account, but you simply can no longer keep track of all these payments. Indeed, that’s a sign that something must be done. You may have already considered borrowing money from family, but this is not always the best solution. Consult a financial expert who will tell you how to handle your finances. DebtQuest can help you in case you have questions.
You Have No Savings
All you have is debt, and your entire emergency fund has already been used. Not having any extra savings is annoying because you have no money on hand for emergencies. Try to get your money back in order, but it will be some time before you can start building some savings again. Continue for a while, and before you know it, you can slowly begin to save money.
You Have Physical Complaints
Life is life, and money is not always that what brings us happiness. It may happen that besides the problem in your wallet, you are also physically suffering. This may concern physical severe diseases and emotional distress: you sleep badly because you worry too much and do not perform enough at work. You have difficulty concentrating because your thoughts are elsewhere. Now is the time to do something about your problems.
What’s the Solution?
How much credit card debt is ok? If you think about it – it’s not ok at all. But it’s easy to say to “just don’t get into debt.” Reality is, of course, different. Do you recognize some or most of these signs we described? That’s not good news, but don’t worry – DebtQuest will explain how to handle your debts!
First, you can start thinking about consolidation; this solution combines several loans. This gives you a better overview of your debts. A significant advantage of this loan is that you can pay back over a more extended repayment period to lower the monthly payments. Several financial institutions offer this loan.
Second, you can also call in the help of a financial expert when you don’t see a solution anymore. It is, therefore, important to think before you take out a personal loan or credit card. Do you really need it, and can you also pay it back? Also, consider insurance with your loan. It can help you or your family help pay off the loan in the event of an emergency or death.
The Consumer Financial Protection Bureau recommends you keep your debt-to-income ratio below 43%. Statistically speaking, people with debts exceeding 43% often have too much credit card debt. If you find yourself in a situation with too much debt, reach out to DebtQuest USA – we can help you discuss possible solutions.