Dealing With Loans and Credit Card Debt You Can't Pay

If you're finding it difficult or impossible to keep up with your loan payments or credit card bills, many banks, credit unions, other financial institutions, and credit card issuers have assistance programs. In this article, you'll get information about options that might be available if you're worried about falling behind in payments on a personal loan, small business loan, or credit card.

Available Help for Personal Loans and Small Business Loans

Many banks, credit unions, and other financial institutions offer various options if you have trouble paying on an existing loan.

If You Have a Personal Loan or Small Business Loan

Most lenders and creditors will try to adjust or alter terms on existing loans if the borrower is facing a financial hardship. For instance, your lender might work with you to extend your repayment term or otherwise restructure your debt obligation to, for example, reduce the interest rate. Your lender might also offer payment accommodations, such as allowing you to skip some payments or extending the due dates, which would help you avoid a delinquency and negative credit bureau reporting.

To find out what kind of relief is available, contact your lender.

Other Kinds of Assistance

Banks, credit unions, and other financial institutions also offer other forms of help to customers, such as:

• waiving automated teller machine (ATM) fees and increasing ATM daily cash withdrawal limits
• waiving overdraft fees, and
• offering or expanding their payday alternative loan programs (you should definitely avoid payday loans if at all possible).

Available Assistance for Credit Card Debts

Credit card issuers offer different kinds of help. You might consider asking if any of the below options are available:

• skipping payments (also called "deferring" payments), perhaps without accruing interest
• making a lower minimum payment
• getting a lower interest rate or an interest waiver
• obtaining a payment deadline extension, or
• getting a waiver of late charges.

Many issuers offer these kinds of options. Contact your card issuer by phone, online, or its app to find out what alternatives are available to you and to work something out. Pay the amount you and the creditor agree upon and stick to the terms of the agreement.

On the downside, some of these options could cost you more or damage your credit scores in the long run. For example, interest charges might be added to your existing balance and increase your debt, resulting in a higher credit utilization rate that lowers your credit scores.

So, generally, you should try to make at least the minimum payment on your credit card accounts on time if you can. Take advantage of these emergency measures only if you're in dire need, meaning your livelihood is significantly affected, or you don't have savings you can use.

If Possible, Don't Use Your Credit Card as a Loan, and Don't Get Cash Advances

Getting Help With Managing Debt

If you need help managing your debts and financial situation, consider speaking with a nonprofit credit counseling agency, like those affiliated with the National Foundation for Credit Counseling. A credit counselor will discuss strategies with you, as well as tell you about ways to reduce your debt and other financial obligations.

You should, however, avoid for-profit debt relief services.

If you need legal advice about handling your debts and creditors, talk to a knowledgeable debt settlement attorney in your area.