Friday, 15 March 2024

6 signs it’s time to get some financial help

There are many factors that can place you under financial stress and put you at risk of personal insolvency. Some of these, such as unexpected job loss or ill health, can be outside of your control. However, there are also often clear signs that you’re heading into the financial danger zone. If these sound familiar, it’s time to be proactive and get expert help. Getting help may enable you to prevent bankruptcy, which can carry ongoing consequences for your credit score and your ability to secure personal credit and loans in the future.

 

1) Your debt-to-income ratio is very high

According to the Reserve Bank of Australia, our national debt-to-income ratio is at an all-time high of 189 per cent. When the amount of debt you are carrying is out of proportion to your income, you are likely to face financial stress, particularly should interest rates suddenly rise. Most lenders require a debt ratio of 35% or less. Anything over this is considered too high. There are online calculators that can help you work out your debt-to-income ratio.

 

2) You regularly miss payments or are late making payments

If you are missing payments on a regular basis, especially if you are having difficulty paying for your major expenses, such as your home or car loan repayment, this is a big red flag that you’re heading into troubled waters financially.

Read next: Leading causes of personal insolvency and how to avoid them.

 

3) You are unable to make the minimum repayments

If you are struggling to pay even the minimum repayments due on your credit cards or other loans, this is an important early warning sign that you may be headed toward personal insolvency. Prospective lenders will see this as a big red flag if they run a credit check on you, particularly if you’re debt-to-income ratio is also high.

Read next: Struggling with debt? Contact us to find out how we can help.

 

4) You’re relying on credit cards to pay for essentials

It can sometimes make sense to use a credit card, such as a reward card, to pay for your expenses and then pay the balance in full each month. However, using your credit card to pay for essentials, such as groceries, petrol and utilities, and then finding yourself unable to pay the balance each month is one of the early warning signs of impending bankruptcy. Particularly if you are barely able to pay the minimum due each month.

 

5) You’re getting debt collection calls

Debt collection cas are a big, obvious sign that trouble is looming. You may find yourself being threatened with legal action by creditors, which can result in your wages being garnished, furthering existing financial problems.

 

6) You’ve exhausted all other options

Specialist companies such as Credit Repair Australia can offer a number of possible solutions if you are facing debt stress. Among these are negotiations with creditors, a break or ‘moratorium’ on your debt for up to 12 months while you get back on track. If these informal solutions aren’t suitable for your situation, they can also assist in other options such as entering into a debt agreement or filing for bankruptcy.

If you are facing financial stress and are worried about personal insolvency, talk to us about our debt solutions.