Janet Bodnar (Deputy Editor, Kiplinger’s Personal Finance) gives expert video advice on: What should I do if I can't pay my credit card bills? and more...
What should I do if I can't pay my credit card bills?
Well if you're really having trouble paying the car payment, making the mortgage payment, you know, making even the minimum payments on your loans, first of all, you certainly want to keep up the payments on the things that are really critical, like for example the mortgate, you know, you definitely don't want to lose the house. So what this means is doing a little bit of triage here and getting money from wherever else you can, cutting expenses from wherever else you can so that you can make the payments on the things that are really critical. Then things like credit cards, which are less critical. You can call up your credit card issuer and say, "Look, you know, I'm having trouble paying my loans or I'm having a little bit of trouble right now. Is there something you can do for me? Can you cut my interest rate? Can you stretch out the term of the loan?", that sort of thing. But there are certain things that you can ask your creditor to do and they may be very willing to do this because, again, they'd rather have you paying off your debts than not paying off your debts.
What is a credit counselor, and how can they help?
If you're really having trouble going it alone, you just owe too much money and you really need outside help, a credit counselor can do that. What a credit counselor can do is set you up on a budget. So, not only are you paying off your debts but, just going forward. You have a better spending plan and a better handle on where your money is going. Unspoken definition: Credit Counselor: Advisor who educates debtor about credit, budgeting and financial management. They can also set up a repayment plan with your creditors so that, you are perhaps making one payment that's being parceled out to all your creditors. Perhaps your creditors agree to take less than you actually owe them. The thing to do though, is when you're looking for a credit counselor, to get a reputable one. Unspoken organization name: National Foundation for Credit Counseling. www.nfcc.org. There's an organization called the National Foundation for Credit Counselors. That should be the first place you go to look for a credit counselor in your area, that's also a member of that organization.
What should I beware of in hiring a credit counselor?
When hiring a credit counsellor, firstly be wary of anyone who doesn't want to set up a budget plan for you, because that really should be the first thing they do. If they're not willing to do that, then they're not very good credit counsellors. Secondly, be wary if they're rushing you into a payment-plan because if they put you into a payment plan, some of their compensation comes from the lenders that they're repaying. So, if the credit counsellor in too much of a rush to get you into paying off debts then they're working for the lenders, they're not really working for you. The third thing that you want to be aware of is whether or not they are going to be charging you any fees. You should not be paying high fees for any of this. A budget plan - $20 to set up a budget plan should be enough. Members of the National Foundation for Credit Counselling on average charge about $23 to set up a repayment plan and then they charge about $14 per month to maintain that payment plan. If you're being asked to pay more than that, you're being asked to pay too much.