If you have a habit of spending and debt load is rising day by day. It is going out of control. It is simply called Debt Spiral. Thus you may enter a Debt Spiral. If it continues and it reaches at the point, you can’t pay suitably .Your overall debt level is rising and the cycle is getting worsened. The debt loan reaches such a point that you can’t bear the debt load. You miss the payment and the interest grows on. Ultimately the spiral leads to bankruptcy and you can’t control it.
The Best Way to Avoid Debt Spiral
At first, you should recognize that you are entering a debt spiral. You must stop the spiral at the primary stage. You should borrow at the limit that you can pay in time. It may be short time borrowing. Consider your monthly expenses and payment – mortgage or rent. Buy your monthly necessaries. Pay insurance and property taxes.
Set Savings Target
You should analyze how much you earn and how you should spend. Save a percentage of your income in each month. Your saving target must be set up. You try to reach your saving goal.
Cut your excessive expenses
You should know where your money is going. Cut your excessive expenses, otherwise, you will have to face a higher debt load. It would be best to use credit card than use debit card and cash to avoid on the debt. Keep the use of your credit cards to an absolute minimum. It would be best if you can avoid them altogether. Use debit cards and cash as much as possible to avoid on the debt.
At first pay the high rated debt
Save a percentage of your income and use a portion of your monthly savings to pay down the high rated debt. It is the best way to pay the highest interest rate debt in order to lessen your overall debt and pay the minimum amount on the other debt. You know that the highest interest debt is credit card debt. Thus, you can avoid a debt spiral.
It is difficult to stop a debt spiral if it continues. So, you must always aware of the debt spiral and take necessary steps in time.