5 signs that you're caught in a debt spiral

Woman with purseResearch indicates that most people wait for their unsecured debts to reach almost £10,000 before they begin to get concerned about owing too much, by which time it may require drastic action to solve the problem.

Here, we look at how you can tell if you are caught in a debt spiral.

1. You can only manage minimum repayments
Clearly, the amount you can afford to borrow without hitting problems depends on the income you have coming in.

But around 10% of the Britons currently in debt are thought to be in such dire financial straits they are unable to make anything more than the minimum payments. If you are one of these people, then it is fair to say that your debts are getting out of control and are in need of attention.

It is therefore vital to take action now to prevent the situation becoming so serious that you are forced to start missing payments and incurring penalty charges as a result.

2. You are living on credit
Even if you are able to pay off more than the minimum repayments on your debts each month, one of the first signs of over-indebtedness is that your credit card balance, for example, is rising rather than falling.

These are difficult times, and many cash-strapped families are turning to credit cards to help cover household bills.

But if you find that you are always spending on your credit card towards the end of the month, it may not be long before you too are unable to make more than the minimum repayments and are standing on the edge of a financial precipice.

3. You are having to miss payments
If you are finding it increasingly difficult to meet even the minimum repayments on your debts, then it is always worth speaking directly to your creditors to try to come up with a suitable repayment plan.

This is particularly important if you may be forced to miss a mortgage payment, which could lead to you losing your home.

There are a number of free debt advice services that can help. These include the CCCS and National Debtline.

4. You are receiving threatening letters or calls
If you have defaulted on a credit agreement, or have missed a number of payments, it is likely that the companies concerned will start to take action to get you to pay up.

And if you are ignoring letters and calls from organisations to which you owe money, then you are basically burying your head in the sand when you need to be finding a solution to the problem - which will only get worse as penalty charges and interest continue to mount up.

Again, a debt charity should be able to liaise with your creditors and help you get back on track.

5. You have been forced to borrow from "sub-prime" sources
One of the problems with having lots of debt is that you are unlikely to qualify for the most competitive deals - whether that be for mortgages, loans or credit cards.

And if you have already started missing payments, then mainstream lenders are unlikely to want you as a customer at all.

If you have been forced to borrow from a sub-prime source - such as a loan shark or payday loan provider - then it is definitely time to take advice from one of the charities mentioned above, especially as the interest and penalty charges on debts of this kind are generally sky high.

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