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Six signs that you have too much debt.

How much debt is too much debt? It’s a simple question that not many of us are able to answer. Here we look six red flags that you have too much debt.

  1. You can only afford your minimum payments

Paying the bare minimum on your accounts is the first red flag that you have too much debt. It means that you’re paying significantly more for the interest on the amount you owe.

The main takeaway here is that if your budget doesn’t allow you to accelerate your debt payments beyond the minimum, it’s time to make a plan.

  1. Your credit cards are maxed out

One of the most important factors in determining your credit score is your credit utilisation ratio. This highlights exactly how much of your available credit you’re actually using. If you’ve currently maxed out more than 30% of your credit lines, your credit score will take a hit because it suggests that you’re unable to responsibly manage your debt.

If you recognise this red flag in your own financial situation you need to ask yourself why your cards are constantly maxed out. Are you reaching for your cards to make expensive impulse purchases? Are you paying for groceries with your credit card?

The good news is that creating a solid budget can prevent you from going further into the red.

  1. Your debt-to-income ratio is above 36%

Interest rates aside, you can also determine if you have too much debt simply by looking at how your total monthly payments relate to your income. This is aptly known as your debt-to-income (DTI) ratio. To figure it out, add up all your monthly minimum payments and then divide that total by your gross monthly income. What you’re left with is your DTI – 36 percent or less is the ideal situation.

Countrywide in SA, household debt has reached around +/-71% of total household income. This percentage includes aspects such as personal loans, overdrafts, credit cards, accounts and home loans.


  1. Your interest fees exceed 20 % of your income

Figuring out if you have too much debt is as easy as crunching a few numbers. Begin by working out how much you’re paying in interest charges across all your debt, from car loans to student debt to credit card bills. If it’s more than 20 percent of your monthly take-home pay, you’re in trouble.

  1. You’re struggling to build a ‘rainy day’ fund.

Try setting a cash savings target that’s equal to at least three months’ worth of expenses.

This should keep your head above water if you’re hit with an unexpected job loss or bill. Building an emergency fund doesn’t happen overnight. It’s a gradual process that instantly becomes harder if a large chunk of your income is going toward debt payments.

But you can only stretch your money so far – unfortunately, this only strengthens the debt cycle. If you have no emergency fund and you’re hit with, say, a R5000 car repair, you’ll end up turning to a credit card to see you through. One bright spot, though: you don’t have to choose between paying off debt and building your emergency fund. It’s possible to do both if you leverage the right strategies. Be that as it may, if account balances are a hurdle between you and a healthy savings account, that’s a major red flag.

  1. Your financial situation is influencing you psychologically.

There is no doubt that debt adds additional stress to your household. If you find yourself getting nervous towards month-end or observe mood changes when finance is the topic of conversation, it’s a clear sign that you are debt-stressed.


Having too much debt influences your credit score. Your credit score influences all your financial options in the future. If you recognise any red flags it’s highly recommended to seek help from a debt counsellor. 


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