How do I know if I have a debt problem?

  • Are you only paying the minimum or is your debt increasing rather than decreasing?
  • Are you stressed or depressed about your debt and do you avoid calls and mails or are you being dishonest?
  • Then you may have a debt problem.
  • This article was first published on initiative of South African Savings and Investment Association (ASIS).

Your debt problem may be a small problem that is just beginning or it may have already escalated into something unmanageable. Whatever situation you find yourself in with your debt, the first step is to identify that you have a problem.

You often spend more than you earn in a month

If you don’t know or care how much you owe, you can’t control your debt. When you take on debt, you need to be fully aware of how much you owe, how you will repay it, how long it will take, and the total amount of interest you will repay.

You borrow to pay off your debts

If you borrow more money to pay off your debts, you’re in serious trouble. The cycle will eventually prevent you from making all the repayments and your interest charges will increase. If you are in this situation, it is time to make some serious plans to reduce your expenses in order to reduce your debt or you may need to undergo a debt review.

READ | What is the Debt Review?

You cannot afford to pay your living expenses after paying off your debts

If paying off your debt leaves you with too little to live on after cutting out luxuries, it’s probably because you’re over-indebted. If a credit grantor has given you more credit than you can afford to repay, you may be declared over-indebted and the debt may be suspended. You are over-indebted if you are unable to meet your repayments given what you earn, your future income and your obligations. If a court finds you over-indebted, it can order that your debt be suspended without interest or that the debt be restructured.

You delay payments for necessities

If you are not paying necessary expenses such as tuition or insurance, you probably also have a debt problem.

You hide your expenses

If you hide your expenses from your partner or family, you probably know that you are spending more than you earn and are probably going into debt. But don’t risk ending well. Face your problem, reduce your expenses and pay off the debt before it becomes a problem. It’s easier to cut expenses if you have an honest conversation with your partner or family so they can support your decision.

You lose sleep, feel hopeless, or spend impulsively

Uncontrollable debt will make you feel hopeless, leading to depression and anxiety. It is very stressful to deal with threats of repossession of your car or house or of water or electricity being cut off. This stress can make you sick and create problems concentrating at home and at work. It is possible that in order to cope with these bad feelings, you will spend more impulsively to improve your mood, but this good feeling will only last for a short time. You need a longer, more sustainable way to manage your debt – formally or on your own. You just need to commit and have the will to do what is necessary.

You pay the minimum on your debts

If you’re only paying the minimum on a credit card or an overdraft, your debt is likely to snowball as the interest charges add up. Paying the minimum on long-term debt, like a home loan, may be necessary initially when you’re young and just starting out in your working life. But the sooner you can increase your repayments and free yourself from debt, the sooner you’ll take control of your financial situation and can start investing and growing your wealth.

You are denied credit

You may be denied credit because the credit you applied for is more than you can afford to repay. But you can also be denied credit because when the credit grantor assessed you, they found that you already had as much credit as you can afford. If you have the maximum credit you can afford and are looking for more, you have a problem.

Your repayments do not reduce your debt

If your repayments are only for your interest and don’t reduce the amount you owe, you should increase your repayments or stop borrowing more, for example, a credit card. Your repayments must repay some of the principal debt you owe or you will never extinguish your debt.

You borrow from your home loan to support yourself

If you dip into your home loan to pay for groceries, clothes, transportation, vacations, or any other necessities or luxuries, you’re backing off. As you get older, you should be paying off your home loan and accumulating wealth rather than increasing your debt.

You use expensive short-term credit to survive

If you use payday loans, personal loans and loan sharks to borrow money regularly, you have a problem. Your goal should be to live within your means, save for the things you need, and have enough emergency funds to cover any financial crisis. If you’re not there yet, use cheaper forms of credit like your home loan or credit card wisely. Borrow the minimum and repay it as soon as you can.

You skipped refunds

If you haven’t been able to meet your repayments and haven’t honored a credit agreement, it’s probably a sign that you’re in trouble. Maybe a one-time event caused your financial problem and you can recover, but if a financial problem caused you to skip a payment, you’re probably living too close to the edge and should consider setting up an emergency fund.

LEARN MORE | How to build an emergency fund?

You avoid phone calls, mails or e-mails, messages or the doorbell

If you’re avoiding calls, mail, and messages from your credit provider, you’ve got a problem. It’s probably because you know you missed a payment, you still can’t pay, and you don’t want to admit it. If you’re having trouble repaying your debt, it may be hard to admit, but being honest and negotiating with the credit provider to find a more manageable way to repay will ultimately be much easier than dodging calls and having the provider credit card hands you over to a collection agent.

You borrow to gamble or speculate

If you borrow money to gamble or take bets, you have a problem because you have no certainty that you will earn enough to pay off the debt. Similarly, if you are borrowing to invest in a high-risk investment such as a single stock, rather than a diversified portfolio of stocks, you may also find yourself in trouble, as the stock may not provide the expected returns, but the debt will definitely incur interest.

This article was first published on, an initiative of the South African Savings and Investment Association (ASIS).

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John A. Bogar