What to Do If You Can’t Make Minimum Payments
Inflation is making it harder for many people to keep up with their monthly expenses. Whether you’re having trouble with the minimum required payment on an auto loan, credit card, or another monthly bill, knowing the best way to handle the situation isn’t always easy.
While you might believe paying part of the required minimum is enough to keep creditors at bay, sending in less than the minimum payment is unlikely to stop them from charging late fees or reporting payments as delinquent.
Fortunately, you can take steps to avoid racking up unnecessary fees or harming your credit. Here are a few worth considering.
Prioritize Your Bills
Ensuring you have adequate shelter and food should be your top priority. When these two areas are taken care of, you’re more likely to stay safe and healthy enough to work to pay bills. These expenses should move to the top of your list.
Next, cancel subscription services or other unnecessary costs. If you have credit cards or other loan debts, add them to the list in order of the smallest to the largest minimum monthly payment. Use the money saved eliminating unnecessary expenses to pay those bills.
Contact Your Creditors
Staying silent and hoping for the best rarely results in a good outcome. But contacting creditors and letting them know about your situation could reveal solutions you didn’t know existed.
Some utility companies, credit card issuers, and even financial institutions offer hardship programs that may allow you to skip a payment or temporarily make smaller payments without negatively affecting your credit. These companies may waive late fees and agree to avoid reporting late payments if you comply with revised repayment agreements.
Remember that communication is vital to dealing with financial struggles. It’s crucial that you start the conversation soon since hardship programs are rarely retroactive.
Increase Your Income
Earning more money could make paying the minimum amount due on bills less of a struggle. Explore the possibility of working additional hours with your current employer, working a second job, using your skills to start a side hustle, or selling items you no longer use or need.
If you’re past due on any accounts, use the additional money raised to pay off those past-due balances. Consider eliminating recurring loan payments, like credit cards, which can free up cash to make payments on other necessary bills.
Consider Debt Consolidation
You could lower required minimum monthly payments by consolidating or refinancing current debts. While neither action removes your obligation to repay the debt, you can gain more control over the situation. Qualified borrowers use a zero introductory interest rate credit card or low-interest rate loan to pay off multiple debts. This allows you to bring these accounts current and could result in a new lower minimum required monthly payment.
Ask for Professional Help
A qualified credit counselor can help find permanent financial solutions to payment problems. They can help you create a realistic budget and debt repayment plan. These actions could put you in a stronger financial position within months, not years. As a valued member of Credit Union of Colorado, you have free access to financial education and counseling services. Contact GreenPath™ Financial Wellness to get started.