Nearly half of all Americans live paycheck to paycheck, so any disaster, big or small, can send you into debt. If that disaster happens to be losing a job, you may find yourself with debt you can no longer pay at the normal rate, or even at all.
Follow these helpful steps to deal with the debt collection process:
Step 1: Try to Work With Them
Start by explaining your situation. Many debtors think if they can’t pay, then there is no reason to speak to a bill collector. The collector may be able to work out a new, easier payment plan with you, or at least buy you some time.
If you pay what you can, credit companies see it as a sign of good faith that you’re willing to work with them. If you’re too nervous to speak with them over the phone, write them a letter, email, or fax.
Step 2: Get a Better Rate
See if there is any way the card company will offer a better interest rate to make your payments easier and reduce the amount of time it will take to get debt-free. If they won’t, see if your bank will offer a credit card with no interest for six months to a year. Then, transfer the balance to the card with zero interest. Consider debt consolidation with your bank or a credit union if you have a good credit score and decent income.
Step 3: Reduce Your Expenses
If you’re still paying off a vehicle, see if you can sell it. Downsize to a cheaper car with lower monthly payments or none at all. Make a budget, and eliminate anything that is not essential. The Debt Diva’s blog is a good resource for tips on ways to cut costs and live frugally.
The less expenses you have the more you can allocate to paying down your debt and stopping the collector calls.
Step 4: Increase Your Income
Get a part-time job with flexible hours and use that money specifically for debt elimination. Try to find ways to turn a hobby into a second source of income. You can also pick up extra cash by having a garage sale, or saling items you no longer use or need online.
Step 5: Set Boundaries
Don’t let debt collectors bully or harass you. Consider seeking help from a debt counseling service, settlement service, or legal help to get the collectors off your back. Make sure the service has no upfront costs, or at least a low cost and services that are worth it. Be sure to research the service first, as some of these are scams that can hurt your credit.