Signs You Have Too Much Debt and How to Stop Drowning in It

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Sep 14, 2022

Signs You Have Too Much Debt and How to Stop Drowning in It

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Whether you’re saddled with credit card debt, student loans, auto loans, or a combination of these or more, debt takes a toll on our personal finances and stress levels. While some thoughts of good debt versus bad debt and how much is okay to have, the bottom line is we all have a point where the debt gets out of control.

When you reach a point where you’re struggling to keep up with minimum payments, and you are making zero progress on credit card balances or other loans, then you have too much debt. You can also calculate your . Your DTI tells you how much you’re spending each month to keep up with credit card bills and other debts, and when it is too high, you know you’re dealing with too much debt.

In this article

Calculating debt-to-income ratio

To calculate your DTI, add up all of your monthly debt payments and divide it by your monthly income. Your monthly debt payments should include:

Credit card payments
Alimony and child support payments
Medical bills
Rent or mortgage payments
Student loans
Auto loans
Personal loans

For example, suppose your monthly debt payments total $2,000, and your monthly income is $7,000. In that case, your DTI is .28, or 28% ($2,000 / $7,000=.28). Lenders typically want a DTI of no more than 35%, but this is a good number to continue tracking even if you are not applying for another loan.

A higher DTI is one sign you have too much debt, but there are others too. The toll debt takes goes far beyond a percentage listed on paper. What are the other signs you should be looking for?

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Top signs you have too much debt

There are other indicators your debt may be growing out of control. Here are other ways you know it’s time to deal with a growing debt balance.

You can’t keep up with minimum debt payments. The monthly minimum payments are too high for your income, and you can’t make them after taking care of other monthly expenses.
You are unsure how much debt you owe. You are afraid to calculate the amount of debt and total up the debt balance.
No emergency fund exists, or you can’t establish one. When you have too much debt, it’s hard to free up cash to establish an emergency fund, or you’ve had to deplete it simply to make your minimum monthly payments.
You are racking up too many late payments. You spend too much each month on late charges, costing you more and adding to the debt balance.
You rely on credit to survive. In financial emergencies, you have to turn to a credit card for payment, cash advances, or even payday loans. You have no savings to cover emergencies, such as a trip to the dentist or an unexpected home repair bill.
You are no longer able to contribute to retirement. You stop contributing to retirement accounts, such as 401(k), because you need as much take-home pay as possible to make monthly minimum payments.
Your amount of debt is over half of your income. You can use the DTI calculation to determine if your debt balance exceeds half of the money you bring in each month.
Minimum or regular payments are not making a dent in credit balances. You’ve stretched your credit limit, and you’re not making any progress towards paying off debt.
You avoid answering phone calls or letters from debt collectors. This happens when you are uncomfortable taking phone calls or opening your mail to find out what you owe. Related: How to Deal with Debt Collectors
You hide your spending habits. You may have too much debt when you are worried about a partner’s reaction to a financial decision you have made, such as missing payments or opening up a new credit card account.
Finances cause additional stress and affect your sleep. When the worry and stress of debt become too much, it can affect your mood and ability to sleep.
You live paycheck to paycheck. Living paycheck to paycheck means you have no savings in place and are one financial setback away from disaster.

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Options when dealing with too much debt

If you have too much debt and these signs hit a little too close to home, then it’s time to make changes and take action. Fortunately, you can take steps to get the debt under control and hopefully lessen the stress in your life.

Be honest about how much debt you have

The best way to create an action plan is to understand how much debt you’re dealing with. Although it’s hard, creating a list of what you owe is the first step. This includes making a list of all debts you owe and what your total monthly debt payments are adding up to. While it feels overwhelming, having the facts in hand is essential for you to make decisions going forward to deal with the debt problem.

Create a budget

If you’ve never learned how to budget, now is the start. A budget tells your money where to go and gives you a framework to stay within. While some feel a budget is too constricting, a budget is essential for keeping track of monthly payments and due dates with who you owe. Having a budget prevents you from making one late payment, so it’s worth the effort! There are several budgeting methods, which means you may need to try various ones to find the one you can stick with.

Consider a debt consolidation loan

A debt consolidation loan allows you to combine credit card debt or personal loan debt into one singular monthly payment. If you can qualify for lower interest rates, you could save thousands of dollars in interest. There are pros and cons to taking on debt to reduce debt, such as a potential negative impact on your credit score. A debt consolidation loan may increase your credit utilization number, the amount of credit you use versus the available credit you’re extended. Too high of a utilization number can negatively impact your credit score.

On the positive side, debt consolidation may make juggling multiple monthly debt payments more manageable and allow you to pay debt off sooner.

Seek credit counseling

Sometimes budgeting may not yield the results you need, and your journey to being debt-free may benefit from working with a credit counselor. Credit counselors offer various services, but most will review your finances — including your debts — and work with you to create a debt management plan for unsecured debt (including medical bills). A debt management plan involves making a payment to the credit counseling company, which then makes the payments on time on your behalf. There are fees involved in this service, but you could benefit from a detailed action plan and possibly avoid bankruptcy.

Enroll in a debt settlement program

Debt settlement programs may also help you pay off your existing debt, but the debt relief will come with a fee. The companies offering this service will negotiate lower debt payments on your behalf with your creditors. There is no guarantee their services will result in lower settlements, but if it does work, it could help you avoid bankruptcy by lowering your debt balance to more manageable levels. These programs impact your credit score and should not be considered lightly before choosing.

These are a handful of options available to you to help get your personal finances on track and start your debt-free journey. There are other possibilities, too, such as bringing in extra monthly income through side hustles, getting a higher-paying job, or applying for a promotional 0% APR balance transfer credit card to cut down on interest payments.

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Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
Subject to qualification and approval. $1,500 monthly income required.
Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.

Apply for Debt Relief Today With TurboDebt!

The bottom line

No exact number or percentage defines how much debt is too much, but there are signs when the debt is starting to overwhelm your finances. Carrying too much debt impacts your wallet and your well-being and could even affect your personal relationships. By recognizing these warning signs as soon as possible — and dealing with debt head-on — you can improve your overall financial health. Living with crippling debt is no way to live, and the good news is there are resources available to help you improve your financial situation.

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Sara Coleman is a former corporate gal turned creative entrepreneur. She began writing professionally several years ago and now contributes to multiple websites, blogs, and magazines. She’s also an avid reader and can’t resist a great historical fiction novel. Sara holds a BA in journalism from the University of Georgia and can be found supporting her Bulldogs every chance she has. She resides in Charlotte, North Carolina, with her wonderfully supportive husband and three children. When she’s not ushering her kids to sports and dance lessons, she can be found creating content for her own website, TheProperPen.com.

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