What Are Your Options When You Can’t Make Payments?

According to the Census Bureau, the poverty rate in the U.S. has reached 11.4%, with over 37 million people experiencing poverty. Unfortunately, the current situation is unlikely to show any improvement soon. High living costs, increased energy costs, and housing inflation are putting many households at risk. 

However, there is more than one step to the descent into poverty. More often than not, understanding what is in your power when you struggle with unpaid bills can help you regain financial stability. 

So what can you do when you struggle to make payments or when you can’t make payments without increasing your debts?

You can ask to have some debts canceled

Not everybody can obtain debt cancellation. Yet, according to the bankruptcy law, if your financial situation has reached a point of no return, it can be more effective for your future and for your creditors to officially manage your unsecured debts. In this case, you can either consider eliminating or reorganizing existing debts. 

Not everyone is eligible to file for bankruptcy, but the purpose of the process is to allow people who are struggling financially and can’t recover to get a fresh start again. Beware, filing for bankruptcy will also affect your credit score. 

You can consider negotiating with your creditors

Are all creditors open to negotiating payment terms? Not necessarily, but many appreciate that negotiation may be the only way to get paid. So, it can be useful to reach out to your creditors and openly discuss the possibility of implementing a payment plan. 

Some may be hard to convince. However, it could help you gradually pay off debts without putting your household at risk. Sometimes, you can ask for interest rate removal, which could be enough to manage repayment without financial damage. 

You can seek cheaper alternatives

While it may seem easier to say, there are many cost-effective options that could transform your budget. You could move to a different house to cut down your living costs. 

For instance, some locations are cheaper than others, so if you are renting, it could save up to 20% of your monthly expenses. Moving to a modern property could bring down energy costs. It can provide the financial breathing room you need to face recurring payments. 

Is a debt consolidation loan worth it? 

Debt consolidation loans serve one clear purpose: They allow you to pay off substantial debts in one go. Yet, they do not cancel the debt, as you will need to pay off the loan. 

Obtaining a consolidation debt requires meeting eligibility criteria, such as your credit score. If you let debts accumulate for too long, they are likely to drag your credit score down, making you ineligible. 

Another thing to consider is the interest rate of a consolidation loan. To be beneficial for your financial situation, the interest rate must be lower than the interests accrued on the different debts you wish to consolidate. If the loan has a higher rate, it will not improve your situation, but will make it worse. 

 Not being able to make payments on time is becoming a harsh reality for millions of Americans trying to manage the sudden increase in day-to-day costs. Understanding your options and how you can protect yourself from poverty can be instrumental in achieving financial stability in the long term.