Managing Your Money in Good Times and Bad
What to do if you can't afford a loan or credit card
With the economy weakening, more people are finding it difficult to make mortgage, credit card and other payments. If you're having financial difficulties due to a job loss, a higher mortgage payment because of an interest rate reset or any other reason it's important to take action, preferably as soon as you think you may not be able to afford your expenses.
Regardless of the reasons for your financial difficulties, here are some basic steps to take.
Consider moves that can enable you to make your payments. Look for ways to cut expenses. If possible, pay your bills using funds in your bank and brokerage accounts, and avoid withdrawing or borrowing money from your retirement savings.
Keeping current on loan, credit card and other bill payments also will help minimize damage to your credit score which is especially important if your financial difficulties are because of a job loss. Why? Because as you apply for new jobs, employers may review your credit report.
Contact your lenders if you anticipate payment problems. Don't wait until after you can't make your mortgage payment or the minimum payment due on your credit card, because by then, you may have damaged your credit rating and you may have fewer options available for getting help.
Be proactive if your payment problems have already begun. Remember, if you can't make your mortgage payments, you risk losing your home to foreclosure. You need to seek help...and do so fast... by discussing your options with your lender or loan servicer (the company that collects payments and performs other work for the lender, including negotiating new payment plans with borrowers who are late or delinquent on their loan payments).
Likewise, if you're having problems paying your credit card, student loan or other debt, contact your lender to work out a solution. And if you need help negotiating with a lender or otherwise getting a debt problem under control, consider asking an attorney, accountant or another trusted advisor to refer you to a reliable credit counselor who, at little or no cost, can help you develop a recovery plan. Many communities have free legal-assistance programs that can provide advice and referrals.