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Knowing your own debt limits

 

It is fundamental that as consumers we are capable of detecting if we are going beyond our debt limits. Experts consider that we should spend more than 20% of income on debt payment. This percentage may be less (between 12% and 15 % maximum), depending on the cost of living in the area where we live, the cost of rent, food prices and other fixed costs

As well as this, if we contract debts, which are for a long period of time, (purchase of a flat over 15 to 20 years for example) we should not only consider the financial situation at the time of contracting the debt but also the predicted length of the debt. If we do not take this fact into account and act with precaution we could contract debts that will condition our quality of life over many years. Not being able to do something that one desires (sometimes for little money) because all the money available is required to pay off debts, leads to frustration and concern that can bring on secondary effects.

Comisión EuropeaEscuela Europea de ConsumidoresGobierno de CantabriaMAG (Estudios de Consumo) S.L.IFAVConsomation et Logement Cadre de VieAssociation d'avocats

 

When we contract debts thinking about a determinate situation and this changes, we should think seriously about a plan to reduce the debt or to negotiate it .

  

 

The uncertainty over whether one can or cannot pay outstanding debts affects some people in such a away that it can lead to ill health, they become introverted, reserved or can even fall into other problems which can lead them into a vicious circle from which it is difficult to escape

When we contract debts thinking about a determinate situation and this changes, we should think seriously about a plan to reduce the debt or to negotiate it to obtain forms of payment, which are more suited to the new situation

Some persons are not capable of using credit cards rationally. If a person is conscious of this, the best they can do is return, rip up or keep the cards out of daily reach (in a locked box, a safe and inaccessible place, etc). It all depends on what level the addiction of buying on credit has reached. Many persons, when they see something they like, if they have the credit card handy they buy without stopping to think if they can afford to buy it