Learn when to get help and how to talk down your debt.
By Jenny Hoff, Photo by Michael Longmire
A personal financial crisis can be as scary as a health crisis: You may feel very alone, very desperate and powerless to change it yourself. The good news is, a financial setback is not terminal. There are steps you can take to get out of it, and there are professionals available to help you do it.
Suffering monetarily can come in many forms, from a major dip in your credit scores due to late payments or identity theft, an accumulation of debt that continues to snowball due to high interest rates or even just the sensation that at any moment, one small upset could leave you without any money to pay for your most basic needs.
“If it’s causing you a lot of stress, if you’re afraid to answer your phone, if you dread going to the mailbox and seeing your bills, even if you’re keeping up but you have this sinking feeling, you are so much better off getting help now rather than later,” says Sally Herigstad, author of Help! I Can’t Pay My Bills: Surviving a Financial Crisis.
Credit counselors can help you manage debt, work on your credit scores and even make a plan to save up for a house. Organizations like the National Foundation for Credit Counseling (NFCC) offer a variety of counseling services and they advertise that no one is turned away, regardless of income level.
If your credit scores are good but your debt is becoming unmanageable (you may be making your minimum payment every month but accumulating interest), one option is to apply for a no- or low-interest card and transfer your debt to that one card. It may come with an intro offer of 12-15 months without interest, giving you the chance to pay off the debt steadily over the course of many months. There will be transfer fees associated with the switch as well as a hike in interest once the intro period is up, but if you make a plan and pay off your debt in time, this can save you thousands in interest you would have otherwise paid.
If you don’t qualify for a no-interest card, you can always attempt to negotiate down your debt with your creditors. There are companies that will help you in the process, but Hergistad suggests you try to do it yourself first.
“When negotiating down your debt you’re gonna need some money to negotiate with,” she says. “If you’re flat-out broke, it’s not going to help you. If you can come up with some money and say to a creditor, ‘Will you take this much instead of the full amount?’ and show them a reason they should, they will often do that.”
Most importantly, Hergistad says, be wary of taking out loans, either in the form of credit cards or car loans. “You need to avoid interest like the plague, be allergic to it,” she says. Unless it’s a home, which should increase in value over time, pay cash for everything. That way, in times of financial downturns you can concentrate on finding more work and building your wealth instead of surviving calls from creditors.