Making Minimum Debt Payments

November 30, 2009

minimum debt paymentsThere are few consumers who haven’t heard the sage advice offered by those who are all too familiar with credit card debt. “Pay off your balance in full every month.” “Don’t charge more than you could afford to pay cash for.” Or, “Never exceed half of your credit limit.”

Following this advice will make your life much easier, not to mention less expensive. But not everyone follows it to the letter. Some charge a little more and a little more until they’re in debt over their heads. Others are very careful to keep their debt at a manageable level, but they end up losing their jobs or having other financial difficulties. Either way, they might eventually find themselves unable to keep up with even their minimum payments.

Some who are unable to make their payments hide from their lenders, screening phone calls and tossing the notices they send in the trash. Others are quick to consider bankruptcy. But neither of these is a good first reaction. In most cases, you could save yourself a lot of headaches by just talking to the lender.

Lenders would prefer for you to pay your obligation in full rather than skip out on it. So if you let them know that you’re having problems, they are often quite willing to work with you. They might let you skip a payment, or they could lower your interest and/or monthly payment. They aren’t obligated to do such things, but it’s certainly worth a try.

The best time to talk to the lender is as soon as you realize that you’re going to be late with a payment. This will let them know that you’re serious about paying your debt, and that they’re not wasting their time by working with you. Here are some tips for the big talk.

  • Before you make the phone call, write out a budget plan. This will help you determine how much you can realistically commit to paying each month. It will also show responsibility on your part.
  • Fill the lender in on the circumstances that are causing you to have trouble making payments. You don’t necessarily have to share every last detail, just let them know the basics of what’s going on. If you have a reasonable explanation, you’ll get much further than you would if you just said you needed your payments lowered.
  • If the lender offers concessions, make sure you have the full details before agreeing to it. How long will they accept the lowered payment amount? Will you have to pay any additional fees in order to set up or maintain the payment plan? Are there any special requirements, such as setting up automatic transfers?
  • If you can’t come to an agreement with the lender, talk to a credit counselor. Credit counselors are trained to help debtors rework their budgets so that they can make debt payments. And if needed, they will negotiate with creditors on your behalf. They can often get better deals than individual consumers because they work regularly with lenders.
  • No one likes to admit that they can’t make their debt payments. But it can happen to anyone. By being straightforward with the lender, you have a much better chance of working out something that’s agreeable to everyone involved.

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