What Is Unmanageable Debt?

Proactive budgeting can help protect against unmanageable debt situations.
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Unmanageable debt generally means having more debt payments than you can keep up with an a monthly basis. More specifically, it means the total of your monthly expenses and debt payments exceeds your monthly net income. Having unmanageable debt is difficult, but there are options to simplify your struggles if your debt hasn't gotten completely out of control.

Where It Begins

In her June 2006 USA TODAY article "In debt before you start," Sandra Block pointed out that the average college graduate left school with about $19,000 in student loan debt. Many grads carry much more debt, with a small percentage owing more than $100,000. While college is promoted as an investment in your future, owing $300 to $1,000 per month -- or more -- on student loans makes buying a home and car difficult from the start.

Debt Ratios

Lenders often use debt ratios to figure out how much you can afford to borrow. You also should have interest in these ratios to protect yourself from unmanageable debt. Conventional mortgage lenders use 28 percent mortgage-to-income and 36 percent debt-to-income ratios as basic guidelines on loan amounts. If your gross monthly income is $6,000, for instance, your monthly mortgage shouldn't exceed $1,680 and your total debts shouldn't exceed $2,160. Both ratios are important. If you stretch to buy a house, you need to understand you can't afford as much debt for a car and other major purchases. If you already have $500 or more in student loan payments, you need to stay well below the 28 percent guideline on your mortgage.

Debt Consolidation

Unmanageable debt has levels of severity. If you are struggling to break even each month or can barely make your minimum card payments, you have some options to get into a more manageable situation. Refinancing home and auto loans with high rates can save you a lot of money and reduce your monthly payments. Consolidating high-interest personal loans and credit card debt into one home equity loan or personal loan also can help. This gives you one credit payment, a lower average interest rate and lower monthly payments.

Debt Help

At the extreme, debt help solutions or credit counselors might be a final resort if you are well behind on payments and at risk of losing your car or home. These are providers that represent you in negotiating with creditors. Their intent is to get your debt obligation lowered and to help you get more manageable monthly debt. This regularly includes the provider collecting one payment from you and paying each creditor. If you already have used up your home's equity and can't get new loans, this might be your last best option. However, be aware of less reputable debt help providers that charge huge fees and have limited success.

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