Are You Stuck in a Debt Spiral – Here’s How To Fix It

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Before we start to think about how to escape debt, let’s make sure we know what type of debt we’re talking about here.

It’s important to remember that most people are in some form of debt right now. If you owe money to someone or something, that’s a debt that you need to pay back one day.

For instance, you might be in debt due to a student loan. You don’t have to even think about paying it back right now because you’re still in university.

But that doesn’t mean that the debt you owe doesn’t exist. It just means that currently it’s not weighing down on you, which is good.

Or, perhaps you have taken out a mortgage on a home, and if that’s the case, you’re in debt to the lender. When you buy a home with a mortgage, you don’t really own the house at all.

You’ll discover that as soon as you reach a point where you can no longer afford the repayments.

A lot of people think that you only have to worry about debt when you can no longer afford to pay it. This is a big mistake.

For instance, you might rack up a debt on your credit card and technically you can afford to pay it back. But because you haven’t that does mean you have to keep it in mind.

You may not be worried, but you should certainly consider it when you continue to make purchases. Particularly, if you are continuing to buy on credit.

So, we always have to think about debts and remember that they can be dangerous. At the same time, though, not everyone in debt is in trouble right now. So, when do things go wrong?

 

The Debt Spiral

Debt tends to become a more serious problem for two reasons.

  •  There is a change in financial circumstance that means the debt is to no longer affordable. For instance, someone who loses their job will have a hard time paying the bills that they owe. Instead, they’ll borrow buying on credit and enter the debt spiral.
  • Or, the level of debt someone is under has slowly but surely grown. Usually, because they have not taken the idea of buying on credit seriously.

You need to understand what a credit card is because there definitely seems to be a misconception about this within the consumer population.

Think of buying on a credit card like walking up to someone and asking them to buy something for you. It’s not your money, you’ll have to pay it back, and they’ll probably charge a fee if you don’t pay it back on time.

In this way, people enter the debt spiral aware or oblivious and rest assured, neither are great options. Debt doesn’t happen overnight though, it builds gradually.

Eventually, you’ll reach the point where you can no longer afford to pay. It’s at this point that people start to think about routes of escape.

 

Escaping The Debt

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Below are a few ways to get out of a debt spiral.

#1 Borrow and Pay Less

You’ve got a few different paths to choose from when you decide enough is finally enough. You can borrow to pay less. It sounds crazy, but it isn’t really.

If you borrow something like a debt consolidation loan, all your debts are pushed into one sum. It’s easier to pay and puts a lot less pressure on your finances.

As such, it’s a fantastic option and one that many people choose. You just have to make sure that you select a good lender. Don’t forget there will be loan companies offering consolidation loans that put you in a worse position.

That said if you have multiple loans coming from different places it can still be useful to pay them off as one bill. Psychologically, it also feels like less of a strain and pressure on your finances.

#2 Sell Your Way Out

Another possibility is to sell your way out. If you’re selling your way out depending on your level of debt, you’ll probably be parting with a lot of possessions.

Some of these things might be items that you want to hold onto or get back. If that’s the case, sell them to a pawn shop. If you’re quick recovering, you may be able to buy the items back once you are up on your feet again.

Finally, you can think about changing your buying habits. It’s the best option if your debt is building but not at the point where it’s an unclimbable mountain.

Stop borrowing and start learning how to live on a proper budget. If you do this, you should never have to face the prospect of dangerous levels of debt again.  

 

You Can Get Out of the Spiral

In the end it is possible to get out of a debt spiral.  I’ve done it myself.  It just requires to do three important things.

  • First, stop adding to your already mountain of debt.  I think this is pretty self explanatory.
  • Second, get a plan in place to get rid of your debt and stick to it.  Whether you need to get a loan or sell your way out of your debt, or even do a debt snowball plan put a plan in place you’ll stick with.
  • Third and finally, build an emergency savings to prevent it from happening again.  Without this you’ll be much more likely to fall back into debt.

So what are you doing get out of your debt spiral?  Follow the advice I’ve shared above and you’ll likely find some light at the end of the tunnel.  Share your thoughts and comments below.

Cheers!

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One Comment

  1. Yep, the best way to get rid of debt is to not borrow in the first place. Being smart about your options in borrowing beforehand will prevent a bad event down the road. Being savvy enough to borrow smartly (which means rarely) requires a patience and desire to educate yourself. Doing so will help you out tremendously in the future.

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