5 signs that you're in a debt spiral

Research carried out at MoneySupermarket found that most people wait for their unsecured debts to reach around £10,000 before they start worrying about owing too much. But the longer you leave it, the more drastic the action you are likely to have to take to get your finances back under control. And the first step is recognising that you are heading for trouble, which is why it is useful to know the signs. Here, we explain how you can tell if you are caught in a debt spiral...

By Clare Francis

You are living on credit

One of the first signs of over-indebtedness is that your credit card balance, for example, is rising rather than falling (particularly if you have not used it to make any large, one-off purchases).

We are living in difficult times, and many cash-strapped families are turning to credit cards to help cover everyday essentials such as the weekly shop and 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 owe so much that it becomes increasingly difficult to meet the repayments - never mind reduce your reliance on credit to survive.

Every week, Clare Francis, financial journalist and editor of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal.
You can only make the minimum repayments

Around one in 10 indebted Britons is in such dire financial straits that they are unable to manage anything more than the minimum payments towards their borrowing every month. If that sounds familiar, then it is fair to say that your debts are in need of attention. In fact, it is crucial 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.
You are missing payments

The point at which debt problems really start to spiral out of control is often when you start to miss payments because you can no longer afford to meet your commitments. This is due to the penalty charges and extra interest you incur as a result.

If you are finding it increasingly difficult to meet even the minimum repayments on your debts, it is therefore a good idea to speak directly to your creditors as soon as possible to try to come up with a suitable repayment plan.

A free debt advice service such as the CCCS or National Debtline should be able to help you with this.
You are receiving threatening letters or calls

If you have missed card, loan or mortgage repayments it is likely that the companies concerned will take action to make you pay up. Ignoring their letters and calls will only exacerbate the situation and could lead to a visit from the bailiffs or even the loss of your home.

Again, a debt charity such as the ones mentioned above will be able to liaise with your creditors and help you get back on track.
You are borrowing 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 for mortgages, loansor credit cards.

And if you have already started missing payments, then mainstream lenders are unlikely to want you as a customer at all because they view you as 'sub-prime'.

Consequently, being forced to borrow from a 'sub-prime' source - such as a loan shark – is a sign that it is definitely time to take some independent advice from one of the charities mentioned above, especially as the interest rates and penalty charges on debts of this kind are usually huge.

Next week we’ll look at how to get out of debt.

Every week, Clare Francis, financial journalist and editor of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal.
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