Do you know that every 14th person in Poland is indebted, which results from a report published in 2018? This number is very large and it results, among others, from the lack of knowledge of people what the debt spiral is.
Lack of awareness and a sense of consistency in paying debts causes even greater debts, and thus even more problems. Of course, it is not that consumers deliberately fall into debt that it is difficult for them to get out of. We decided to suggest how not to fall into the spiral of debt, and what to do when the debt exceeds our earnings.
What is a debt spiral?
We can hear from many people that they have no money because … they repay loans and credits. Not one but a few! Borrowers are not even aware that several obligations that we have to pay back every month can cause a loop that is tightening tightly on our budget. We wake up when a bailiff knocks on our door and it is a bit late.
The debt spiral is often not seen as very bad – and this is false thinking! People who have many loans or loans to pay off do not realize and take another one which causes a spiral that increases from month to month. This is not only a financial problem, but also a spiral of debt can affect the mentality of the person in debt. Lack of freedom in spending money or lack of money for things every day are just one of the effects of a lack of control over your obligations.
Why are we falling into a debt spiral?
- A large number of loans or credits. People who are interested in a loan for the indebted , often already have several in their account and to pay off their previous liabilities, they take further loans. This is a very bad solution, which in most cases causes a spiral of debt.
- Random situation . We have influence on what we spend money, but we don’t have influence on random situations. Sometimes on our way we may encounter: illness, loss of a loved one or an accident that prevent us from paying the loan on time. Interest increases and the amount to be repaid increases, resulting in a spiral of debts.
- A light hand to spend money on. Do we really need a new dress or a new computer how old is still working? Spending money on things that we don’t need to live when we are in a difficult financial situation can also lead to a spiral of debt. Sometimes a light hand to spend money is an addiction that is hard to stop.
- Absentmindedness. This feature that never produces good results. All we have to do is forget to pay one of the loan installments, and we may be burdened with repayment of high interest on the loan. These have a negative impact on our portfolio, which as a result our budget is getting worse.
The fact that we are already in a spiral of debts is usually a matter of fact. The most important thing is to prevent it, because when the debts accumulate, it is very difficult to get out of it, because creditors are not interested in what we have to repay the loan or not.
How to get out of the debt spiral?
Do we need specialists who can get out of the debt spiral? No, because everything really depends a lot on us. Below we have written a short guide that will help you get out of the spiral of debt:
First, the plan
As we mentioned before, it all depends on you, so GETTING STARTED! At the beginning it is worth meeting the creditor and spread the debt in installments. This is the first and also the most important element. The debt spiral causes many debts that accumulate. We repay loans at different dates and amounts, and we can either combine them into one or split the debt into convenient installments.
The next step is to enter your fixed costs (e.g. electricity or telephone bills) and compare them with your revenues. We need to know exactly how much money we spend and how much influence we have. Thanks to this, we will thoroughly analyze your budget and know where we stand and how much we can give to loan companies.
Reduce unnecessary spending
Unfortunately, but if we want to get out of the spiral in debt and we have to limit our spending to a minimum. Do we need to drink iced tea in the city? Do we have to go by car to the store and we can’t go by bus? If we save $ 2 on one thing and $ 5 on the other, it will turn out that we saved $ 100 per month. Any amount of money is important to us during this difficult time.
The last point is our consciousness. The problem does not disappear when we replace it with another loan. It is not worth paying off one debt with another loan, because it is the easiest way to fall into a spiral of debts. Borrow consciously and reasonably. Before you take another loan, think about it a few times, do you really need it? If you lack money, it is worth taking some extra work, even casual work, until you collect money for the things you need. You can also sell a car and buy a new one – cheaper. A good option to earn some extra money is to rent a room for students. There are many possibilities to find an additional source of financing.
Help in getting out of the spiral of debts
If you have already tried everything we described in our guide and the problem still has not been solved, it is worth finding support from specialists who will give you free advice. However, watch out for tricksters. Some will want an advance from you don’t trust such companies. There are law firms that provide free advice to people with financial problems.
Or maybe a consolidation loan secured? This is not a good solution. People who are in a spiral of debt are often naive and give in to companies that offer consolidation of all debts against real estate. Often these are interest loans we have already warned against.