The list of problems resulting from having bad debt and not being able to afford monthly payments is long and varied. Start recovering from high interest credit and store cards, or late payments on cars, homes, school loans and medical bills before any more damage is done.
Ignoring the Problem
Whether it is secured or unsecured, a debt will not go away if ignored. The first time the consumer is late with a payment many credit cards will raise the interest rate. Calls will begin as soon as they are late again, and if payments stop completely, the account will be sent to in-house collections. If these efforts fail to set the account straight, it will be sold off to a third party collector and the account will be closed. This cancellation will be noted along with a negative mark for every 30-90 days it is past due.
Ironically, debtors will receive deep discounts over the lump sum amount if they wish to settle at this stage. It is a mistake to think the creditor has given up since they no longer own the consumer’s debt, however. If third party collections fail, the firm will seek restitution in court. This is the worst situation for the debtor as the court can order the funds to be taken from wages or taxes without further notice.
Ignoring a car or house payment has swift consequences; within three to four months of missing payments, a car may be repossessed. The owner of the car can prevent this by leaving the lines of communication open when they are having difficulties making payments.
Missed house payments result in the largest late fees and penalties of any possession. Eventually, a bad history of paying the mortgage will destroy credit scores and result in foreclosure on the home.
Not Hopeless
There are many professionals available to help people deal with debt problems. Credit counselors, debt consolidation firms, and even non-profits can help if the situation has become too difficult to gain control of. Before enlisting this assistance, take action by calling every creditor to whom a back payment is due, or with whom late fees are accumulating.
Resolving to come to an agreement which allows the individual to bring accounts back into good standing is the first step. Credit card companies, auto loan companies, and school loans lenders will often defer interest, divide late payments over several months, or put an account into forbearance to prevent a person from defaulting.
If the debtor can make minimum payments or complete the program offered by the creditor, they can save years of bad credit troubles and thousands in interest.
Last Words
No matter how daunting the situation seems, breaking it down by individual debts creates a tangible reference to start from. If any company is threatening legal action, work with them first and try to settle for forty to sixty cents of the amount owed. Next, communicate with each company, and be honest about the situation. Most creditors are willing to work with their customers to prevent loans from defaulting, which ultimately costs them, and the debtor money.
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