OK, so everyone’s been in that situation
at some point. You blew too much cash on a night out, bought that new toy you wanted, new outfit, bookie, significant other... whatever the source of your downfall
... you lack the cash for whatever reason you need it most now
. What to do what to do. Well there are...
The Obvious Things:
- In the case of bills, call the creditor, landlord, whoever, and explain the situation to them. Exclude humiliating details like the unexpected loss at the track, elaborate on more important things, like "...your sound decision at the time which turned unfortunate...". Then ask nicely for an extension. Don’t be stupid and say you can’t pay, chances are you owe that cash to someone regardless. Be polite, respectful, and remember, chances are if you can’t pay your rent, your landlord can’t pay his mortgage, so try and accommodate them.
- Then there is the always lousy borrowing of cash. If it’s a miniscule amount, you never end up paying it back. If it’s an enourmous amount, you’ll never end up saving for it entirely and it will get blown on something else. Someone 'spots' you twenty, you take it as a gift, she expects it back, and now you’re on her shit list. Borrowing money is bad. If you plan to do it, also plan to pay it back before you accept the offer: "OK, I will borrow $500 bucks from you, but I will give you $50 at each paycheck I get and I’ll give you some interest, too (if appropriate)." And remember what you said.
- Consolidation... if it works for you, consolidation of your debts can be beneficial. It’s also a mess of problems if you screw it up. Imagine the big picture, you refinance your home and use the $ saved and pay off your credit cards. The smaller picture... you take out a small consolidation loan of a grand or so. What you have to be careful of is recreating your previous history of debt. If you pay off credit cards and then rack up charges again, you’ll be stuck with the consolidated loan payment on top of your new credit card monthly payment. Then you're twice as screwed. In a not so bad situation like the home refinancing, you just got back to your same situation of bills you can’t handle. Same deal, be smart about it, cancel your credit cards once you pay them off. Make sure the consolidated loan is in fact a smaller percentage rate than your credit cards.
- Don’t make the minimum payment. You are pretty much paying off only interest when you do that, and you never pay off your debt. A buck more makes a difference, a few bucks more a bigger difference. Do the math.
- If you pay off a chunk of cash on a credit card, don’t immediately rack your card back up to maxed out. That’s called revolving debt. And it means you can’t work off what you said you would. It’s a bad mark on your credit record that will haunt you. For the same token, don’t cycle between several credit cards. That’s called revolving credit, and that .0002% lower interest rate will not help you. A history of credit for an extended period of time with one company is better.
- On credit cards, realize when you are over the limit. If your card limit is $2000 and your balance is $2250, if you pay them off $50 bucks minimum like they ask, next time your billing cycle comes along, you will be hit up with an over the limit fee, that and interst and you’ll be *increasing* your debt with each payment! Also remember, if you’re $250 over the limit, and pay that off, next billing cycle the interest will again put you over and you can be hit with over the limit payments again.
- Try not to pay late. Sometimes late is better than never, but again, fees are involved. Sometimes if you are nice and call companies, they will extend your date for you. Try it, it’s just a phone call, it won't hurt, at least physically.
- If you do end up paying off a credit card, cut it up and cancel the account. At the least cut up the card. Even if you don’t close the account, not having a card accessible will prevent you from making any hasty purchases. You can always call and say your card was melted by the dryer, etc and get another in a few days.
And Now The Sneaky Tricks:
The fact is, sometimes we get to a place where a late payment one more time kicks you out of your house, you have no one to borrow from and on top of that your credit is so bad a consolidation loan is out of reach. There are last resorts:
- Your Rent: Call up your city or state’s rental housing and real estate public office. Find out the rules. In most cases, landlords aren’t allowed to kick you out until you have skipped paying rent for a certain period of time. If you are having a financial hardship then there are laws to protect you, and for you to exploit if you need it. Like increasing your rent. If they think they can do that, 1. read your lease, they may be able to, but then 2. again, find out the laws. They may and try and jack up your rent a certain percentage, but if you are an existing tenant, usually there is a cap, say 7%. If they say they want to up it 20%, call them on it. They may b e trying to screw you or they may be dumb landlords, so be nice. When your lease is over it may leave a sour note and they can choose not to renew your lease, but if it helps for the time being then so be it. Also remember who your landlord is. A big company with a slew of apartments probably won’t notice your rent two weels late. If he lives upstairs, he could be knocking on your door every day.
- Utility Payments: By law, most utilities can not just be shut off. Especially if it concerns heat or a life necessity. If you have electric heat or gas, there is a waiting period in most states of three months before they can shut it off. They also usually can’t charge you interest. Cable is obviously not a requirement to keep you alive, neither is long distance. But water bills, oil bills, gas and electricity can all be screwed with. If you have to miss a payment on something, make it a utility. And with phone service, a quick easy way to get out of a few bills is to switch companies! Some places will check if you have an outstanding balance. Others can have you call your present provider and have you inform them you are changing companies while they wait listening in on the call. But it can’t hurt to try. Some places even give you free minutes or cash when you change companies! The best part is when you call back your previous provider a few months later and ask to come back! They will certainly take you back, even with $200 of unpaid calls. Ask to work out a payment plan of a few bucks each new payment, and you will be good to go.
- Credit Cards: Again a big company will take time noticing your late payments. The first one they will charge you. By the second one and third they will start xcharging more and calling you. And remember, these are nobodies, so if they say, “Sir, we notice you haven’t made a payment in 60 days...”, then just hang up! Also, there are laws about what time a company can call you in your home. Check the laws for your state, but most times if a company calls you, take down the name of the person who called you, immediately ask for their supervisors name and a number they can be reached at. Then keep a log of how often they called you. After three instances is usually when you can call your police department. They probably won’t look into it very much, but credit card companies don’t always know about things like that. The next time they call, you can inform them you have filed a harassment report with your local police! This may or may not get them off your back for a while. The last resort is when you fail to make a number of payments, in which case it will usually be turned over to a collection agency. Collection agencies can come after you for the $19.95 you owe Columbia House, or the $10,000 you owe Discover Card. Remember this is a last resort, because it will screw your credit. But by the time a bill goes to a collector, months will have passed before they get to your case. The worst case scenario is that they sue you for the cash, in which case if you get a ruling against you, from there you can appeal the decision (if you don’t show, you usually do not get an appeal). Even if you don’t show, if you fail to pay again, the credit company has to sue you again for failure to pay. In which case from there people do things like take a percentage of your wages. But that’s what happens if you let it get to court level. In a best case scenario if it’s a meager amount of money, it won’t be worth a lawyer’s time in expenses and billable hours they will never receive, so the debt just goes away... but a very very bad mark gets placed on your credit history. Fortunately the seven years of clear credit has been reduced by most to three so that can work in your favor if you aren’t planning on needing any credit for a while.
- From there, you have gone from needing to scrape up some cash to... What to do if you have bad credit. Good luck!