There are many reasons why we get into debt. Most often its a result of bad spending habits. In today’s consumer society we are encouraged to have it all today and worry about payment at a later date, we are encouraged by being showed how small the monthly payment can be. Having us emotionally hooked to the product or service we are then tied into paying for it over a long period of time. We are granted credit (through Credit card, loans, etc) granting you favour to buy something now which you can’t afford but can easily pay off in the future. The result is that we end up owing more and owning less. In the pursuit of keeping up with the Joneses, we all are getting into more and more debt. lacking the knowledge, we need to manage that debt, can keep those credit card balances static, or worse, allow them to grow. Once we are in this debt trap it feels like there is no way out, every pound we earn goes toward making these payments. We are no longer in a position to save or build a strong financial foundation for our future. With a little more knowledge in financial literacy, we can change things and be in a more financially empowered position
Here are few warning signs that specify you’re getting into a debt trap:
Diminishing Credit Card Limit
In the beginning, you may find the bank is willing to give you credit, once you get to a certain stage, and start to miss payments your creators will start to reduce your limits
A Deteriorating Credit Score
Your credit score is a pointer of your repayment capabilities and credit health. Once you start making miss payments you will see the score deteriorate, which also means the interest rates you get from creditors go up, making your browning even more expensive.
For a healthy debt profile, it is wise to keep your debt records clear.
Juggling Various Loans
Many find themselves in a situation their monthly income is no longer enough to keep up with the monthly payment. The only way they can make the payment is to brow more from another creditor and make the payment to existing credit card and loans.
Getting back control
Need to put pen to paper and plan out all the loans you have and what you are paying. There are ways you can make these payments to help you get back control. The issue is due to lack of financial education most of us to don’t know where to start and what is available to us to make these payments quicker and get out of this trap.