It is inevitable that a consumer will accumulate debts in their lifetime - whether it is a mortgage, vehicle finance or a credit card. Being completely debt free is a privilege afforded to only a select few. However some debts are healthy and others are not. The question begs though, when is debt too much, and when is a consumer over-indebted and in need of help with their debts?
In order to asses if a consumer’s debts have gone bad, they should consider their budget. If debts are swallowing up an inordinate amount of their disposable income and they are left with very little to cover basic monthly living costs, they are on the route to over-indebtedness. In these cases it is wise to cut certain expenses and perhaps consider debt consolidation.
If debts have reached the point where debt payments are being skipped in favour of affording food and housing costs a consumer is well and truly over-indebted. In these cases a consumer should consider seeking help with debts as soon as possible. Contacting a debt counselling company could help put an end to missed payments and find a way to repay the debts in more convenient terms.
One must also try to avoid becoming over-indebted by not accumulating bad debts. These types of debts can be classified as debts spent on unnecessary items, and have high interest rates. Store cards are an example of bad debts. The repayment periods on these cards are usually very short and inflated with high interest. Instead of buying things like clothing, make-up or household items on credit, save up for them and enjoy owning them without a monthly bill reminding you that you could be paying up to double for the items.
In conclusion it is perfectly fine to incur debt; however one must be careful not to let debts climb to the point of over-indebtedness.
Article written by: Andrea van Tonder 06-2013