You may have more debt than you can afford to pay.
Remember: Your first priority is to pay for your basic needs. That includes:
Pay those expenses first, before you worry about debt payments.
If you can pay for your basic needs, and you have some money to devote to debt payment but you can’t afford your current payments, you have options.
You can try to negotiate with your creditors. If it is a credit card company, call and ask for the hardship department. They will sometimes lower your payments or interest rates for a specific time frame.
You can try a Debt Management Plan. Debt Management Plans are run by nonprofit agencies. They negotiate with creditors on your behalf to get lower payments or interest rates. You can choose which debts to put into the Debt Management Plan, and then you pay the agency that runs the Debt Management Plan a monthly payment and they pay your creditors. The Debt Management Plan has to be completed within 5 years, meaning all debts in the Debt Management Plan have to be paid off in 5 years. Accounts that are put into a Debt Management Plan have to be closed; you can’t continue to use them. You will likely have much lower monthly payments on your debts through a Debt Management Plan, and you will have a clear timeline to pay them off. Your credit score will go down when you start the Debt Management Plan, and will recover over time as you make on-time payments.
We recommend American Financial Solutions for Debt Management Plans.
You can try a debt consolidation loan. Debt consolidation loans are new loans that you use to pay off your old debts; you then make monthly payments on the debt consolidation loan. This will only help if the interest rate for the debt consolidation loan is lower than the interest rates on your current debt, and if you can afford the monthly payments on the debt consolidation loan.
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To Do: If you can’t afford your debt payments, contact American Financial Solutions and get a quote for a debt management plan.
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To Do: If you can’t afford your debt payments, research your debt consolidation loan options. Get tips on finding a reputable lender in the Building Credit with New Accounts section.
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