How Much Debt Is Too Much Debt?

Along with nasty weather, the beginning of the year can bring stress over mounting credit card debt. Is your debt hangover merely a symptom of the season, something you’ll be able to recover from easily? Or is it a bigger problem that could put your overall financial health at risk?

If you’re able to pay off your credit cards in full most months and have money left over to save, your debt probably isn’t going to threaten your overall financial health. But if your credit card debt is growing, it’s probably time to explore ways to deal with it.

Not sure how much debt is too much? Check out this list of warning signs. If you can say “yes” to one or more of them, you should think about starting to deal with your debt before it gets out of control.

1. Your debt is growing each month

Leaving holiday spending out of the picture, if you’ve been carrying a balance on your cards and that balance has been increasing, you could be risk of falling deeper into debt. As the carried balance grows, you’ll be forced to pay more in interest (and potentially in late fees if you miss a payment). Your payments each month, even if they are higher than the minimums, will make even less of a dent into the principal. Your debt will keep growing, potentially beyond your ability to pay it back.

2. You can’t keep up with minimum payments

If you pay only the minimums on your debt, it could take you years or even decades to clear it. And if you’re struggling to even make those minimum payments, you’re more likely to lose ground rapidly. Your credit score may begin to drop because your debt-to-income ratio is too high. This could hurt your long-term financial health and leave you with fewer borrowing options for getting out of debt down the road.

3. Debt stress is affecting your health

While a large debt burden causes poor financial health, it also can be tied to physical and mental health issues. According to the Mayo Clinic, depression and anxiety over mounting debt can lead to symptoms including insomnia, headaches, high blood pressure, and panic disorders—all of which can seriously affect long-term health. If you’re feeling stress or anxiety about your debt, you’re probably beyond wondering how much debt is too much and can move on to the next step–taking action to become debt-free.

4. You took on debt to pay debt

Taking out a personal loan or a balance transfer card can be a smart strategy if you can get a low interest rate, favorable payment terms, and are able to pay off your debt during those promotional periods. But when you take out a personal loan to pay off credit card debt, remember that you’re not getting out of debt—you’re just moving it around. If your debt is caused by bad financial habits or job loss, a personal loan probably won’t address these problems and will likely only add one more debt to your life.

5. You’re unable to save

According to most financial experts, it’s wise to have a six-month cushion of funds to cover emergency events like job loss or unexpected expenses. If you’re living paycheck to paycheck and unable to save money after paying your bills, you may have too much debt and need to adjust your budget. One small, unexpected event like a medical expense or car issue could force you into even more debt. Find expenses you can cut or reduce, so you can have money left over to put into a savings account.

Don’t have a budget? Learn how to create one. (article card in blog format)

6. Debt collectors are calling

If you’re wondering how much debt is too much, but you’ve fallen behind on payments and debt collectors are calling you nightly, you already have your answer. Getting hounded by debt collectors is usually a clear sign that your finances are getting out of control. Your credit score is also probably hurting at this point, so it may be time to start seeking solutions. One option is to look for ways to consolidate your credit cards to streamline your monthly payments.

Explore your options for getting out of debt

If any of the above warning signs hit home for you, try not to spend your time blaming yourself. Instead, focus on the fact that you’re taking your first steps toward resolving your debt issues. Freedom Debt Relief is here to help you understand your options for dealing with your debt, including our debt settlement program. Our Certified Debt Consultants can help you find a solution that can help put you on the path to a better financial future. Find out if you qualify right now.