When is the best time to catch a growing debt burden? Before it gets out of hand. You can generally spot a debt problem early on with indicators, such as calls and letters from creditors, "juggling" bills and credit card payments, making only minimum monthly payments, taking out a new loan to repay existing debts, and increasing credit card balances.
Is the number of bills you owe and/or the outstanding balance on your debts increasing each month? This could signal an increasing reliance on the use of credit. If you cut back on credit buying now, you will be ahead of the game.
Are you consistently paying only the minimum due each month on your credit cards and debts? This, too, can be a critical indicator. When you pay only the minimum amount each month, you are paying high finance charges on the unpaid balance.
How do you deal with a mounting debt problem? There are several ways, including contacting creditors to seek relief, debt consolidation, and working with a non-profit credit counseling agency. Making "power payments" is another method to systematically put you on the path to being debt free.
What are power payments? A power payment means that, as soon as one debt is totally repaid, the monthly payment from that account (e.g., $25 for Sears) is applied to another debt. Money from paid accounts continues to be combined to pay off other debts at progressively accelerated rates until eventually all debts are paid. The result can be hundreds, even thousands, of dollars saved on interest payments and months or years earlier repayment at no additional monthly cost.