Six signs you're caught in a debt spiral

DeadlineSometimes it can seem like there's no escape from temptations to get into (or further into) debt. You switch the telly on and – surprise! – yet another advert for sofas on interest-free credit. You check your emails and wince at the gaudy banner ads advertising payday loans as a quick and easy 'get-cash-now!' solution.

Little wonder then that many of us borrow a bit too much and swiftly find ourselves in over our head. We can fall into a pattern of borrowing more than intended, constantly playing catch up with more loans, more credit cards, and more digging into the overdraft. This is known as the 'debt spiral'.
%VIRTUAL-SkimlinksPromo%So what are the six signs that show that you're caught in this spiral? Let us fill you in...

1. You're constantly in your overdraft
Many people don't consider an overdraft on their bank account as a debt. Your money goes in, you spend it, it fills up again next payday... what's the problem?

Regularly finding yourself at the bottom of your overdraft is a debt spiral red flag. Not only are you spending money that technically doesn't belong to you, but if your bank suspects that you're in financial difficulty they can take away your overdraft with very little warning.

2. You ignore your post
If you find yourself immediately stashing your bank statement in the bin (which is risky in this age of identity theft) this can also indicate a debt spiral situation.
It's human nature to avoid the things that scare us or make us feel uncomfortable. Hiding your bank statement can mean that deep down you know you have a problem but you don't know how to deal with it effectively.

3. The credit card pops out constantly
Sometimes life likes to throw us fun curveballs like a broken boiler, a tennis ball putting out a window, or perhaps a dog that's accidentally eaten a tennis ball that's put out a window. In those expensive situations, it's easy to see why you would resign to 'putting it on plastic'.

If, however, you regularly find yourself flashing the plastic for the weekly food shopping, and to get you through to the end of the month, take this as a giant neon-lit sign that you may need debt advice.

4. You're behind on the big stuff
We know: living costs are constantly on the rise. Food seems to be more expensive than ever, and most of us wince when we hear the winter fuel bill hit the doormat.

That said, if you're routinely in arrears on your rent or you're getting angry letters from bailiffs over unpaid council tax you have a problem. These are the priority expenses you must stay on top of, and being behind can only mean a serious need to rethink your outgoings.

5. You've taken out credit to pay off credit
When people start to feel overwhelmed by their finances, they sometimes do what's known as 'card-hopping', where they pay off one credit card with another. They may even be considering a consolidation loan. This is when you 'roll-up' all your existing debts into one monthly payment and pay that instead.

Consolidation loans usually take up most if not all of your current credit eligibility, meaning that if you were to take out more credit, you may be deemed to be 'over-committed'. To consider taking out more credit when you're already dealing with a consolidation loan is not a good sign for your financial health.

6. You're considering a payday loan
Payday loans were created as a means to tide you over on a one-off expense until your next payday, when you would pay the loan back. If you're considering a payday loan and you're not completely certain you can comfortably pay it back come payday, you could be in trouble.

It means that you're not making sound long-term decisions when it comes to your money, and this lack of foresight can spell trouble in the future.

How to avoid the debt spiral
Here are our suggestions to avoid falling into a spiral of debt.
  • Draw up a budget and stick to it.
  • Always check online for discount codes before you buy anything.
  • Cut up your credit cards to avoid getting further into debt.
  • If you owe your bank money, bank elsewhere with a basic account to prevent your cash being taken by what's known as right to set-off.
  • Put money aside for a rainy day, even if it's a small amount.
  • Find ways to cut back on living expenses (such as using the comparison sections of sites such as AOL Compare).
  • Check for extra benefits you may be entitled to.
We can help anyone who's in the midst of a debt spiral. Our anonymous advice tool Debt Remedy can get your budget up and running and provide a debt solution in just 20 minutes.

Original post by StepChange Debt Charity.

The brokest towns in Britain
See Gallery
Six signs you're caught in a debt spiral
Read Full Story