A few tips to avoid over-indebtedness

Who hasn’t experienced money problems at some time of their life? But does being occasionally broke at the end of the month mean you’re over-indebted? Of course not. Someone is over-indebted when they can’t face their non-professional debts anymore and struggle to keep up with daily expenses. If you have incidental money problems, you are not over-indebted. Over-indebtedness is a persistent situation that gets worse over time.   Over-indebtedness can be due to unexpected events such as a job loss, changes in the family situation (divorce, separation, etc.) and illness or to too much spending. Anybody can very quickly get caught in the negative spiral of over-indebtedness. Here are a few tips to avoid excessive debt.

What to do?

Anticipate before having financial difficulties! 

Cover your mortgage

When you take out a mortgage, be sure to take out a credit insurance as well. This will protect you in case of an accident or financial difficulties that could disrupt your budget balance. 

Save a maximum of money

Put some money aside as soon as possible. You will be able to face incidental and unexpected expenses much more easily. 

Immediately contact all of your creditors

... and negotiate additional time to repay or reschedule your loans.  

Balance your budget
  • Reduce your current standard of living and only buy the necessities.
  • Don’t make unnecessary purchases and take advantage of special offers when shopping for essentials.
  • Look at all the opportunities to increase your income (wage increase, overtime, claiming all the allowances to which you are entitled, etc.).
  • Take advantage of the benefits of all the insurances you have taken out (disability, job loss, etc.).
  • Reduce your over-indebtedness and earn some cash by selling valuable goods.

What not to do?

Avoid any delay in payment 

Late payments are expensive and will increase your debt load. 

Don't take out new loans

By doing so, you will only make things worse. 

Don't use your revolving credit 

if you have one. Revolving credits have a very high interest rate and it is too tempting to use the credit limit. Very often you can’t repay the loan in full and the interests are getting higher.  

Avoid bank overdraft

Bank overdraft is the same as a revolving credit. But with one big difference: the bank can demand immediate and full repayment of the debit balance at any time.

Don't combine your loans 

Even if this solution reduces your costs immediately by lowering the amount of the monthly instalments, it increases your overall debt load by extending the loan period.  

In short, loans don’t automatically lead to over-indebtedness, provided you don’t over-borrow and keep your budget under control.  

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