How Much Debt Is Too Much? 8 Signs To Look For

We all go through debt at some point in our lifetime or another, and it can help us get through difficult times. But sometimes, debt can be overwhelming. It can prevent you from paying your bills on time or rent/mortgage and even losing your car or home.

When you’re planning to opt for a loan, it can be hard to comprehend how to take control of your finances.

For example, you might find yourself questioning: How much debt is too much? It’s important to know when your debt has become too big to handle on your own—and luckily, there are telltale signs that will let you know exactly when it’s time to ask for help.

Alpine Credits offer home equity loans. When used wisely, these loans can get you out of the debt trap.

However, there isn’t the “same size fits all” phenomenon and the debt limit may vary from individual to individual. Whereas one might find $5000 a big debt, one might not! This depends on various elements, but if you are being taken aback by the thoughts of owing money, you are grounded!

Signs you are under drastic debt

Nobody wants to find themselves drowning in debt. But how much debt is too much? It’s possible to have a little debt and still be able to handle your finances. When your debt gets out of hand, it becomes a problem. Here are seven signs you have too much debt:

1.   Calculate your debt to income ratio

You can use the debt to income ratio to understand whether you’re under burdening debt or how much room you have to opt for additional loans. Debt to income ratio is calculated as recurring monthly debt amount/gross monthly income.

Target a DTI around 35% or below. With a DTI above that, you might find it challenging to secure loans in the future with low-interest rates as it indicates poor financial conditions. Therefore if your DTI is above 43% you need to look out for professional debt management.

2.   Differentiate between good, bad and toxic debts

Good debt can be defined as a loan taken for financial support or purchasing assets that appreciate value. Generally, these debts have low interest and function with fixed monthly payments.

Bad debt can be defined as loans having high or variable interest rates. Generally, bad debts accumulate when you purchase or invest in depreciating items. Ensure to have a healthy balance of good and bad debt.

Toxic debts have skyrocketing interest rates that surpass the future appreciated value of the purchased item or investments. Toxic debts are a sign that you’re under financial burden. If you’ve toxic debts, try repaying them with low-interest loans as much as possible.

3.   Calculate debt load using the 28/36 rule

To calculate the debt load, you can also use the 28/36 rule. According to this rule, you shouldn’t spend anything more than 28% of your gross income on home-related/ generic lifestyle-related expenditures.

Also, the debt repayment amount every month should not go beyond 36% of your gross income. If you dedicate a greater percentage of your gross income to repay debts, you’re under a debt burden.

4.   You can’t make your minimum payments

If you ever find yourself unable or challenging to make the minimum payments on your credit card, it’s a sign you may have too much credit card debt. If you don’t immediately address this issue, it will only get worse. You will fall behind on paying other bills as well since you are putting all of your money toward paying off your debts.

If you’re continually struggling to pay your bills, that’s a major sign you’re in too deep. Or maybe your other bill is late because you paid your credit card bill instead. One month of this juggling isn’t going to put you in financial jeopardy, but if it’s a common occurrence, it might be time to re-evaluate your spending.

5.   Your credit score drops significantly

If your credit score drastically, it’s a sign you may have been spending too freely and not making enough payments on time to cover the expenses. If this occurs, you need to take action immediately before things get worse.

6.   Delayed and no payments for months

Credit card companies and lenders don’t usually report late payments until they are 30 days (or more) past due. If you’re consistently late on making payments by 30 days or more, your credit score could take a hit. The more late payments you accumulate, the bigger the damage to your credit score.

7.   Debt surpasses income

A big red flag that you’re in over your head is if your total debt exceeds 50% of your annual salary. If that’s the case, it may be impossible to pay back what you owe without making serious changes. Get professional services to reduce your debt balance. A professional expert can provide you with the best advice if you should go for debt consolidation or debt management.

8.   Taking hold of new credit cards

If you’ve entirely exhausted your available credit and still need money, it can be tempting to open a new credit card and use its available credit to pay off other cards. This vicious cycle can continue for quite some time until the debtor finally realizes their situation is out of control. This is called “credit card churning.”

If any of these circumstances sound common, you probably need to consider alternatives to evolve up from your debt. In a nutshell, if you find yourself trapped in either of these situations, it’s time to take action!

Debt consolidation can be a feasible way to get out of burdening debts.


These are clear signs that you are in debt, and if you don’t take action soon, you won’t be able to pay your regular bills. If you aren’t careful while securing loans, you could end up spending years paying off loans or credit cards that you can’t afford to pay off.

If you want to avoid such problems in the future, it’s important to start making plans now to address your debts. Whatever choice you make, the goal is the same: to get out of debt as quickly as possible so you can start building a future for yourself.

Leave a Reply

Your email address will not be published. Required fields are marked *