If your unpaid bills are stacking up or you’re getting late notices from lenders and creditors, don’t panic. Instead, take a deep breath and assess the situation. You may not be able to undo whatever circumstances – losing your job, being sick or overspending – that got you to this point, but the future doesn’t have to look bleak.
Consider calling your lenders and creditors and asking to work out a payment plan that you can afford. It’s key that you call your lender or creditor before your account has been turned over to collections. Having a bill go into collections can negatively impact your credit wellness.
Preparing for the call
To prepare for the phone call, look at your budget to see what you can reasonably afford to pay each month. Be ready to explain the reason why you’re unable to pay the minimum due and keep in mind that a letter of financial hardship explaining your situation and/or written proof of your circumstances may be required. Additionally, you should be prepared to tell them when you will be able to pay your late balance.
If you feel uneasy about making the phone call, it may help to write a script before you pick up the phone. Remember that, ultimately, the lender wants you to pay them back. Oftentimes, some lenders may work out a new payment plan, offer a payment extension or reduce interest rates.
It is essential for you to remain calm during the call and listen carefully to what the financial professional says. If they offer an alternative payment plan, be sure to ask if additional fees will be added to your balance.
Asking mortgage lenders for help
For homeowners, mortgages are typically their largest bill. Of course, paying your house payment late can be extremely detrimental to your credit wellness and put you at risk for foreclosure. So, it is key to call your mortgage lender the moment you realize you’re going to be late with a payment.
Some mortgage lenders will offer a forbearance, meaning they will lower your payments or put them on hold for a brief period. Some may offer lower monthly payments by extending the length of the mortgage. Make sure you understand any associated fees that will result from the restructuring of your payment plan. Also, keep in mind that forbearance does not erase what you owe. You'll have to repay any missed or reduced payments in the future.
Deferring student loans
Deferring, or the delaying of, payments may be available for student loans as well. In most cases, interest will accrue during your period of deferment or forbearance. This means your balance will increase and you’ll pay more over the life of your loan.
What if a lender or creditor can’t offer a new payment plan?
If the lender or creditor is unable to work out a new payment agreement, there are credit counseling agencies that may be able to help. However, you should do extensive research to make sure you are working with a credible agency.
Are there other options?
If you have debt across multiple places, talk to your financial professional about consolidation options. This is an opportunity to consolidate higher interest rate debts into a loan with a lower interest rate, possibly with a shorter payoff term. Paying off debt may take time — it’s not a race. But imagine the relief you will experience just knowing that you have a plan in place.
Be proud of your accomplishments
Regardless of which route you decide to take to improve your financial well-being, remind yourself that you're on a journey toward credit wellness. There may be some stumbling blocks along the way, but keep your chin up and continue moving forward. And don’t forget to celebrate the little milestones, starting with making your debt repayment plan. Find an inexpensive way to reward yourself and enjoy that feeling of accomplishment. And this will keep you emotionally connected to working toward your goal.
What if I need help getting started?
If you’re not sure where to start with your credit wellness goals, U.S. Bank offers one-on-one goals coaching at no cost. When you meet with a coach, they will start the goal-setting process by discovering and prioritizing your goals. Your coach will also assist in identifying habits and actions that will help you work toward your goals. Coaches cannot give financial advice or recommend products, but we can connect you with financial professionals to explore options as needed.
Book a free appointment with a goals coach.
Equal Housing Lender