Updated: Nov 19, 2019
You’re drowning in debt. Mortgage, student loans, car note, credit cards… the past due notices keep on piling up and the collectors keep calling.
And you are thinking, what happens when you receive the dreaded Pre-foreclosure notice. You did everything right, you went to college, got a job and bought your first home. Things were not supposed to go like this—but unfortunately, and more often than we like to believe, they do.
Let’s think this through, you are just keeping your head above water and you are fearful you may lose your home which would tank your credit to a worse place than it already is.
What is your next move?
If you are looking for some simple guidance on how to gain better control of your finances and achieve some financial peace, keep reading.
Start by organizing all of your bills including everything you owe or are in collections for. By visually seeing your debt laid out in front of you, it will be easier to understand and harder to ignore.
Start by categorizing your debt into columns by how past due they are ranging from current to 30-60-90 days and lastly, what you have in collections. Stop ignoring the collectors. Reach out to your lenders and let them know your situation and that you are creating a plan to ensure they get paid.
If you are very behind on your mortgage and facing preforeclosure, again and most importantly, do not ignore your lender. You want to get in contact with them immediately to re-open you line of communication. Your lender doesn’t want your house back, as badly as you do not want to give it back. If your lender has initiated the foreclosure process, understand that preforeclosure is a period of time to that gives you the opportunity to fix the situation.
If you feel that you are too behind on your mortgage and you cannot catch up, or even if you do catch up, you may not be able to maintain your payments, it is a good time to consider other options. Selling your property will always be a better option than losing it to foreclosure and filing bankruptcy. (Shameless plug, but if you are in this position, give us a call and we will buy your house, or at least be able to give you personalized advice!).
Over 40 million Americans have student loan debt and if you have defaulted in making payments you are not alone. You can start by suspending your loans until you have other areas of your finances figured out, but you do not want to stay in suspension for too long because interest will accumulate and the debt will continue to grow. A better option may be to change your repayment plan.
The income based repayment option (IBR) is especially helpful if you’re not making your payments due to financial inability to do so. IBR calculates your payments based on a percentage of your available discretionary income, and as long as you make your payments on time for twenty years, any remaining balance may be forgiven.
Click here to learn more about available loan repayment programs.
Tackle your credit card debt with the snowball method,
Step 1: List your debts from smallest to largest regardless of interest rate.
Step 2: Make minimum payments on all your debts except the smallest.
Step 3: Pay as much as possible on your smallest debt.
Step 4: Repeat until each debt is paid in full.
Consider selling your car for a less expensive vehicle. Are you payments upwards of $500 or more per month? Think about how quickly you could decrease your debt if you could apply the additional to your other payments.
Again, it is always worse to ignore your debt. By gaining control of your debt, you will regain control over your life and be able to reach a point of financial peace. You are not alone in this and there are so many resources available to you. Take a deep breath and get started on creating a better life for yourself and loved ones.
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