| How to Borrow Money, Part 4 |
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There is no easy way out of debt problems, but you should first try to dig out from under your hill of bills yourself before taking more drastic action such as seeing a credit counselor or filing for personal bankruptcy. One way or another, you can and will emerge from your predicament. It's not the end of the world. In fact, many who have trod the well-worn path of overindebtedness emerge with much-improved money habits and a bright financial future. The best and most enduring financial lessons are often those hardest learned, I'm afraid. Find out where you stand. Summarize all of your debts, including the total amount due now, the amount due later, the amount overdue, and the minimum payment requirements. Prepare a bare-bones budget. You must prepare a budget that cuts your living expenses to the bone so that you can meet your monthly loan-payment obligations. After housing payments and food, debt payments should be the third item in your emergency budget. If, like most people in your predicament, credit cards caused the problem, take the scissors to all but one or two cards, but don't close the accounts when you eventually pay them off, as that could negatively affect your credit report. Prioritize. If you have many debts from different sources and you aren't sure that you'll be able to pay them all on time, prioritize. Work out a plan for paying the most important bills and for avoiding late charges. Missing an important bill might lead to your car being repossessed or to the shutting off of your electricity. Beyond meeting minimum payments for all your bills, pay off the bills with the highest interest rates (like credit cards) first. Speak with your creditors. If you're unable to make a loan payment on time, contact the lender (before they contact you) to explain your circumstances and work out a payment plan. They may agree to grant you a temporary reduction or delay in payments, or they may waive your late charges. Don't expect them to work miracles, but if you keep lenders informed of your circumstances, many will be accommodating. Also, don't avoid calls or letters from creditors under any circumstances. Creditors would rather know that you are trying to work things out than fear that you are trying to evade your debt. |
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