Home » How To Keep A Lender At Bay When You Can't Make Your Payments

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Times are tough these days for a lot of people.  They are desperately looking for a way o ut of their debt situation.  Too many people are filing for bankruptcy when there are alternatives, and they don't realize how bankruptcy will put further stress on their family.  There are also a lot of debt counselors and debt reduction and elimination services, as well as consolidation services that will simply rip you off and may make your situation worse.  So you have to first figure out how to buy yourself a little time to figure things out.  That means doing something that will cool the collectors down.  As long as your debt hasn't been "written off" yet, you have significant hope that the situation can be resolved within the next year. 

First, you have to let go of your FICO score.  The FICO score is an "I love debt" score, as Dave Ramsey puts it.  You have to go into debt so you can qualify to go further into debt.  What kind of financial planning is that?  Debt is a bad thing.  It warns us of this in the Bible in Proverbs 22:7 where it says "The rich rule over the poor, and the borrower is the lender's slave".  You are subjected to the lender in a master/slave relationship.  The lender must be paid every month on time, or you will suffer consequences.  When you can't make those payments the lender will punish you.  So why would you want to qualify for more debt?  What you really want on your credit report is no negative reporting.  Lazy lenders look at the FICO score to make lending decisions.  However, they are foolish because 95% of credit reports contain errors, and those errors affect the score.  So they are making decisions based on false information.  Lenders who know what they are doing look further and make note of each negative reporting on the credit bureau report.  Right now, you will have a lot of negatives, so what could another negative do to you now?  Let go of it.  You will feel much less stress.

 

Second, you have to get your spending under control.  What got you into trouble in the first place was spending above your means.  For whatever reason, even if the debt was created during a crisis episode in your life, you were unprepared.  You ended up spending above your means.  You didn't plan for the inevitable crisis.  So you have to start planning ahead and saving money for a rainy day when you get out of this current crisis.  In the meantime, you have to cut your spending to the bone, and that means prioritizing your spending and paying for true necessities first and finding ways to raise extra money to settle debts.  Start getting creative, and sell everything you own that isn't a necessity.

 

Finally, you can keep your collectors at bay by feeding them small payments.  You need to allocate some money to send small amounts to pay against debts even if they don't meet the interest charges.  It is something that lets the lender know you intend to pay your debts.  It also keeps them from writing off the debt as quickly.  When they write off the debt it usually ends up in a third-party debt collector's hands and they are much more difficult to deal with and your ability to settle for less than 50% of the balance they claim is greatly diminished.  So by staying with the original lender you have a much better chance of settling the account.  You will want to start saving the extra money you raise and use it as a source of funds to settle in a lump sum.  Don't settle for payments because the agreements give away rights and protections when you default, and will put you much closer to a court judgment.  Knock them out one debt at a time this way, while paying enough on the others to keep them at bay.

 

For further discussion about making credit card debt payments see Jim's website.