How to Avoid the Debt Spiral

At some point in life, most people will encounter debt. Whether it be a car or home loan, you may find yourself going from a manageable debt into a debt spiral. CCCU will teach you more about debt spirals, how it starts, and how you can overcome it if ever occurs.

What is the debt spiral?

If paying off your debts gets difficult, you are in a downward cycle of debt. This can be recognized as a debt spiral. Even if you don't borrow additional money, you may not significantly reduce your overall debt because most of your payments go toward interest.

How do you get trapped in it?

Debt spirals can be caused by a series of events leading you to unexpectedly take on more debt than you can afford. Spirals can begin by losing a job or having emergency expenses. Both factors can make it difficult to repay your debt, but spirals can easily trap you into overspending. Spending more money than you can afford to repay on credit cards or loans with high interest rates may result in significant interest fees that are challenging to pay off.

How can you overcome it?

Breaking the cycle of debt may seem like a daunting task, but with a plan, it is achievable. A great start to ending debt spiral is recognizing the total debt you have. Making a list of your debts and what you can pay towards them each month will help you plan your repayment. Considering different repayment methods as well as consolidating certain debts may save you a lot of money in the long run. Another very important strategy to end a debt spiral is saving. Once you find yourself starting to get out of debt, it will be tempting to then spend your money on luxuries and non-essentials; however, the key is to save, prepare, and prevent.

Planning for the unexpected will help prevent you from starting a dangerous debt spiral. To learn more about managing debt, visit Banzai, Clark County Credit Union’s free Financial Literacy Tool.