Do you have to be on the brink of bankruptcy before you apply for debt relief? Absolutely not. At the same time, debt relief isn’t usually necessary for every little financial problem, especially if you have a strong business and an emergency fund. So how do you know when it’s time to apply for a debt relief like a debt consolidation loan?

Most people can benefit from debt relief once in a while. Sometimes the tell-tale signs are obvious but at other times, you just let debt fill the gap. So, you go on with your usual spending habits and delay bringing your expenses in line with a reduced income until it sets in that debts have become unmanageable. So, if you don’t want to get to this point, here are two signs you need a helping hand.

1. Your credit card balances are growing.

When credit card balances rise, it could mean that-

• You don’t pay credit cards in full each month
• You don’t pay enough to reduce total statement balances over time
• Your financial worries are escalating

Many people use credit cards to pay bills, book flights and make shopping easier. Others use it to borrow money for personal and business use while cash is not yet available.

You have to pay your credit cards on time, every month. If the credit card company received your payments late, they may charge a late fee or raise the interest rates. So, if you missed the due date or you are just making minimum payments, imagine the interest you are going to pay over time. The cash advances, bills and purchase price of the items you have charged to your card accrue an interest. In short, you are buying or paying for things and getting charged with interests and late fees because of missed payments.

Making frequent cash withdrawals can also be a sign that you are not only taking cash, but you are charging interest on the money you borrowed. If you pay late, that’s another fee on top of the interest rates and withdrawal fee.

Here are some important things to consider when it comes to credit card overuse:

• Barely paying the minimum means you’re in for a higher debt. Making minimum payments may take you a long time to pay off your credit card debts and you’ll end up paying more than you intended to borrow.

• Late payments have a negative impact on your credit score. It can cost more than the bank’s withdrawal of the 0% introductory rate. Late payments can damage your credit rating as well. Future creditors will see that you did not pay your bills on time, and it may ruin your chance of getting a low-interest mortgage or other types of financing.

• Watch out for the growing interest rates. Not paying off your credit card balance each month after your 0% introductory period will incur interest not only on the amount that you haven’t repaid but on the total statement balance. It is also important to note that cash withdrawals are not covered with the zero-percent intro price.

2. You can’t set aside money for an emergency fund, even if you wanted to.

Do you have a small reserve to cover emergencies like hospitalisation, car repair and plumbing emergencies at home?

If you can’t cover your regular bills or pay for your daily necessities, it may be difficult to set aside some money for emergency situations. Not having an emergency fund also means that you have a strong tendency to take on emergency loans which usually come with a high interest rate, especially when you have maxed out your credit cards and your personal loan applications are turned down.

Emergency fund helps you avoid credit card debt. While it’s okay to use that piece of plastic until you can get money from another account, frequent credit card use can significantly increase your interest rate, especially if you have a long-standing balance. Things get worse when you’re on an employment hiatus. While an emergency fund may not be able to replace your income, it can cover emergencies and lessen your chances of getting high-interest loans to bridge the gap.

Credit card overuse and absence of emergency funding means your net worth and personal budget don’t complement each other…

If less money comes in and more goes out—it could mean two things: you’re earnings is lower than your expenses, and/or, you don’t have a well-thought out budget.

Many people don’t take budgeting seriously, until they’re crunching numbers to make ends meet. So, if your net worth is lesser than your debts, it’s time to relieve yourself from debt through a comprehensive debt consolidation program.

Our in-house debt specialists at debtconsolidationn.com.au can evaluate your current financial status and discuss with you how our debt relief plan can help you reach both your short and long-term financial goals and eliminate your debts.