Posts Tagged ‘debt secrets’

4 Debt Secrets You Should Know

Are you concerned about managing personal debt? Are your credit card bills impacting your credit rating in a negative way? If so, there are some debt secrets you should be aware of that may help to improve your financial standing.

1. Stay in touch with creditors. Contrary to the idea of avoiding your creditors as long as possible, the opposite approach may help to successfully manage your debt load. If you are facing default because you cannot meet due-dates or minimum payments on credit card accounts due to losing a job or experiencing unexpected additional expenses, contact your creditors to update them of your circumstances. Most companies are eager to work with account holders to temporarily suspend payments, reduce the amount of monthly payments, or extend the payment schedule as needed. But be honest and don’t overuse or abuse this option.

2. Inquire about penalty fees. Late fees or over-the-limit fees, as well as non-use fees, may be optional if you talk to creditors about how to manage this problem in an alternate way. For example, if you are charged a late fee for missing a due-date because of a family vacation or personal illness, the company is likely to waive the fee, especially if you can assure them it is a one-time incident. Similarly, if you are experiencing a shift in household income – such as death or divorce of a spouse, or temporary unemployment – a creditor will probably work with you and cancel the late fee or extend the life of the loan.

3. Make an offer. If you have been carrying a sizable debt for a long time, perhaps years, and it is unlikely that you will be able pay off the balance on schedule, ask the creditor if you can make a settlement offer. This type of offer generally involves offering a certain percentage of the entire loan balance, depending on what you can afford, to pay the balance in full and close the account. For example, let’s say you owe $2,000 for orthodontic work on your child, but your husband has left the family, and your income is cut in half. If you have been making $200 monthly payments, you may be able to get the payment restructured at $100 per month, or the dentist may be willing to accept $1,500 as the balance due, canceling the remaining $500 – if it appears you will not be able to complete the payment schedule as originally set up. It doesn’t hurt to ask.

4. Change your account terms. Ask about a different account with the same creditor or company, especially if it’s a financial institution. For example, you may be paying 12% interest on a basic account, but if your record up to this point is solid, you might be eligible for an upgrade to a platinum account at 6% interest, which will lower your monthly payments.

Don’t sit idly by while your credit rating plummets. Work with your creditors for a win-win solution to the problem.