Aim: Financial Blog for Members

5 ways to take control of your debt

Brenda Porter-Rockwell
August 19, 2014
Stack of file folders for bills

Debt happens. Between mortgages, car loans, and other big-ticket items, owing money to a third party is quite common these days. But a new report from the Urban Institute, a Washington, D.C.-based research firm, says that more than one-third of the U.S. population has past due bills, landing themselves in trouble with creditors.

As the credit market has tightened since the economic recession set in, it’s important to remember that these late payments can damage your credit rating, make it harder to get loans for a car or house and even impact your ability to get a job or secure favorable insurance rates.

The report, “Delinquent Debt in America,” finds that among individuals with debt in collections, the average owed hovers around $5,178. The most common debts include credit card and/or medical or utility bills more than 180 days past due that have been sent to collections agencies. According to the report, the Southern region of the United States has a high concentration of people in debt.

“The share of adults with debt past due on their credit reports varies widely by geographic region. Broadly speaking, people in the South are more likely to have debt past due,” wrote Urban Institute report authors.

According to report authors:

  • The amount of non-mortgage debts in North Carolina is below the national average of $15,898.
  • About four percent of North Carolinians have overdue non-mortgage debt.
  • Forty percent of state residents owe 14.62 percent of their annual income or $4,280 to debt collectors on an average household income of $62,709.
  • Three of North Carolina’s major metro areas (Raleigh, Charlotte, and Greensboro) each have residents with debt collections hovering at or near the 40 percent mark. The national average debt to income ratio is 43 percent.

If you should find yourself among those dealing with delinquent debt, know that creditors do understand how frustrating that situation can be. Creating a plan of action to resolve those overdue payments, however, is important. Here are a few tips to help make you a little more financially fit:

  • Set up a repayment plan with creditors: Mapping out monthly payments helps remind you of the end goal — being free of unwanted debt.
  • Stop spending: If you’re maxed out on one card, don’t take out another.
  • Make more than the minimum payment: Whenever possible, pay more than the minimum required.
  • Tighten your budget: Look for no or low-cost entertainment and cut back on other day-to-day spending, such as weekday lunches. Saving $5 a day adds up to more than $1,200 in savings annually.
  • Consider credit counseling: Don’t be afraid to ask for help from a professional.

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