Many people find themselves in debt. Many people are in debt, whether it’s a mortgage or a loan to purchase a vehicle.
While owing money to banks may be normal, knowing that you owe too many money can help you solve the problem and prevent it from getting worse. It is possible to get rid of all your debts. Once you have achieved this goal, you will have a financial cushion.
You can contact a licensed financial professional to find solutions if you are in too much debt.
How much debt is too much?
These signs will help you identify when debts are too high.
Analyzing the relationship between your income and debt is one way to determine if you’re overburdened. A general rule of thumb is that if your unsecured credit debt exceeds 40% of your income (not including your mortgage), it is considered excessive. You may not be eligible for new loans and could find it difficult to make your monthly payments.
Credit utilization is an important factor in your credit score. This is your credit utilization rate, which is the ratio between how much credit you have available (as balance), and your total credit limit. Your credit score can drop if your utilization rate exceeds 30% of your limit.
Rates and ratios are irrelevant if you can’t pay your credit card or personal loans debt. You should consult an expert if you have difficulty meeting minimum payments or deciding which bill to pay.
