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Getting out of the debt spiral

On Behalf of | Apr 2, 2024 | Collections Defense

There could be hundreds of reasons why people end up in debt. It could be for education, housing, medical needs, emergencies or simply to get by daily. Sometimes, your small debts can accumulate over time, and without you knowing, you are already in a debt spiral.

A recent study reports that the average debt in America is around $104,000 for different reasons. The report also shares that an average 30-year-old has around $84,000 in debt, mainly due to student loans and mortgages. It could be challenging to get out of debt when you do not have enough opportunity to build up your finances.

You might not notice the beginning of a debt spiral

Borrowing funds has its pros and cons. It is helpful when you need funds for your college, but getting that student loan would cost a substantial part of your monthly income. Additionally, you would have more expenses to pay over time—rent, auto loan, healthcare, hobbies and others. The combination of your loans and credit card debts can blow up without you noticing.

You can get into a debt spiral where you borrow money to pay for an existing debt, leading to an increased debt and a repetitive action. Dedicating most of your income to paying off debt is a sign that you are in a debt spiral.

Understanding your current financial status could help you get out of the spiral

Getting into a debt spiral could be overwhelming and disheartening. Nonetheless, it is crucial to recognize and accept your situation. Knowing where you stand could help you plan a realistic solution.

You can follow a spending plan to budget your income across your financial responsibilities. Doing so lets you check where and how to adjust your spending. It could be challenging, but it is a necessary action to reach your goal of eliminating your existing debts.

Find the debt relief strategy that is right for you

Once you have analyzed your current financial situation, it would be best to decide on an appropriate debt repayment strategy.

You could consider debt consolidation to completely pay off your significant debt through a loan offering a lesser interest rate or a more affordable monthly rate. You could also opt for debt settlement, which lets you clear your debt by paying a portion at once. You can seek the assistance of a consumer law firm to help negotiate with your creditor.

Debt repayment could be a real struggle, especially when you feel trapped. Understanding your current financial situation and debt repayment options would be a helpful step in your journey out of the debt spiral.