If you are having trouble paying your debts, it is important to take action
sooner rather than later. Doing nothing leads to much larger problems in the
future, whether it's a bad credit record or bankruptcy resulting in the loss of
assets and even your home. If you're in financial trouble here are some steps to
take to avoid financial ruin in the future.
If you've accumulated a large amount of debt and are having difficulty
paying your bills each month, now is the time to take action--before the bill
collectors start calling.
1. Review each debt. Make sure that the debt creditors claim you owe
is really what you owe and that the amount is correct. If you dispute a debt,
first contact the creditor directly to resolve your questions. If you still have
questions about the debt, contact your state or local consumer protection office
or, in cases of serious creditor abuse, your state Attorney General.
2. Contact your creditors. Let your creditors know you are having
difficulty making your payments. Tell them why you are having trouble-perhaps it
is because you recently lost your job or have unexpected medical bills. Try to
work out an acceptable payment schedule with your creditors. Most are willing to
work with you and will appreciate your honesty and forthrightness.
Tip: Most automobile financing agreements permit your creditor to repossess your car any time you are in default, with no advance notice. If your car is repossessed you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. Do not wait until you are in default. Try to solve the problem with your creditor when you realize you will not be able to meet your payments. It may be better to sell the car yourself and pay off your debt than to incur the added costs of repossession.
3. Budget your expenses. Create a spending plan that allows you to
reduce your debts. Itemize your necessary expenses (such as housing and health
care) and optional expenses (such as entertainment and vacation travel). Stick
to the plan.
4. Try to reduce your expenses. Cut out any unnecessary spending
such as eating out and purchasing expensive entertainment. Consider taking
public transportation or using a car sharing service rather than owning a car.
Clip coupons, purchase generic products at the supermarket and avoid impulse
purchases. Above all, stop incurring new debt. Leave your credit cards at home.
Pay for all purchases in cash or use a debit card instead of a credit card.
5. Pay down and consolidate your debts. Withdrawing savings from
low-interest accounts to settle high-rate loans or credit card debt usually
makes sense. In addition, there are a number of ways to pay off high-interest
loans, such as credit cards, by getting a refinancing or consolidation loan,
such as a second mortgage.
Tip: Selling off a second car not only provides cash but also reduces insurance and other maintenance expenses.
Caution: Be wary of any loan consolidations or other refinancing that actually increase interest owed, or require payments of points or large fees.
Caution: Second mortgages greatly increase the risk that you may lose your home.
You can regain financial health if you act responsibly. But don't wait
until bankruptcy court is your only option. If you're having financial troubles,
don't hesitate to call us. We can help you get back on your feet.
Barry Eisenberg, SCORE Counselor email: barrye003@aol.com
Visit us at www.scoresouthflorids.net
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