What Should You Do When You Can’t Pay Your Monthly Dues?


With society becoming more and more reliant on plastic cards and numerous loans, it is not surprising that many people today have fallen heavily into credit card debts and loans that they can barely service.  

So what should you do in case you suddenly find yourself unable to pay off your monthly loan dues and credit card bills? The answer is simpler than you think — face your debt head on and slowly work your way to eliminate them.

Facing the problem

Many people temporarily escape their credit card and loan obligations until they are financially more stable to pay the monthly dues, but even if you have no secured loans to worry about, hiding from your creditors isn’t the best plan. List down all your loans, insurance payments, bills, every single debt you have, and start calling your creditors to inform them of your financial status.

Some think that banks and lenders would not give them a chance to re-evaluate their loan and credit policies. On the contrary, your bank, for instance, would definitely be open to re-negotiate your loan plan if you inform them. Defaults are hard on the borrower, but they’re doubly hard on banks and lenders. Lending money is part of their business and when you forfeit or default on your loan payment, they lose money.

Contact everyone you owe money to, this includes your best friend who lent you 100 dollars or even your parents who helped you with your home loan.

If you were able to renegotiate loan plans and credit obligations, remember to put it in writing. Everything has to be legal. Otherwise, your lender can insist on your previous obligation and you will have no proof of your new settlement in case either party resort to take legal action.

Remove all lines of credit

You cannot solve a problem with another problem. So until you are financial more stable, get rid of your credit cards and charge cards, everything that gives you access to a line of credit. When you pay a loan using credit, you are not solving your debt problem, you are only putting it off. Pay off existing credit card debt and cancel your line of credit. This may alter your lifestyle immensely, but it is a necessary change.

Likewise, do not take out a new loan during this period — even if you plan to use the money to pay the other loans. Assess your finances thoroughly before considering debt consolidation. Consolidating your debts may take you out of the rut now, but it is not enough. At best, it will push your financial obligations some couple of years before it bothers you again. Consolidation also opens up your line of credit, since your current debt is paid off.  This gives you the option to take out new loans, which will only worsen your situation.

Budget and prioritize

When paying off your debts, budget your funds and prioritize certain loans and debts over others.

Apportion your money to see how much you can use for paying off loans and debts. Once you’ve allotted a specific amount for this, assess your debts to determine which should be paid off immediately. This is why you should call your bank, lenders, and creditors first, to see which loans and credit lines can be renegotiated and even pushed back a couple of months. Can your home loan terms be changed? Do you think your creditor will give you better terms for your car loan?

Housing and transportation are considered as the main priority when paying off debt. You wouldn’t want to lose your home and your car.

Prioritizing your debts also means giving up luxuries, especially if you’re struggling to keep up with your expenses. Food and shelter comes first. Do you have a car loan and a home loan? While these may be priorities, consider exactly how important it is for you and your family. Are you currently paying off loans for a recreational vehicle or a vacation home? Consider selling them. Not only will continuous payment of such loans replete your funds, it will also deprive you of a possible money source to service more important debts.

Selling such properties may seem impractical, considering how much money you spent on it. But if you can’t even pay your bills, you are not in a position to keep superfluous items.

Individuals have different takes on prioritizing debt and loan payments.  Some pay off the essential loans first while others eliminate the loans and credit that cost the most. It is best to find an approach that best suits your capacity and your needs, without taking out new loans.

Financial experts suggest that you do not let your insurance lapse, especially for essentials like medical insurance and home insurance. Keep your insurance and make it work for you. As with most lenders and creditors, insurance companies are open to renegotiation of terms or financial assistance. Make it clear that you want to retain the insurance policy, as long as it is within your current financial capacity.

Also, consider bankruptcy as your last resort. Many Singaporeans are filing for bankruptcy in their desperation, but it has many adverse effects on your financial and credit history, it can even affect your employment. Ask for professional help if you believe your debt trouble is too much to handle on your own.