While consumer debt can be a challenging part of your personal finances, it is quite common. According to a survey, the majority of the American population owes money in one way or another. Some people take a loan to accomplish something, perhaps a larger goal. For others, it is a reminder of a time in a crisis.
No matter the reason for taking out a loan, consumer debt can produce fear in your heart until and unless you pay it off. If you have a debt, you surely must have a payment plan that you follow to pay off the debt. Some tips can help you correct some unhealthy attitudes. If you get sued by your debt collector, perhaps speaking to a Chicago debt collection defense lawyer can help.
Tips when creating a payment plan
Tell someone about it.
It is easy to become overwhelmed with credit card or student loan debt. It is important to think about your repayment options. Talk with a lender about your repayment options and how each could benefit you. For example, if you took out an educational loan, you may consider consolidating or refinancing your student loan. Both methods can greatly reduce interest rates and lower your monthly payments. Contacting various lenders can provide pricing and help you decide which repayment plan is best for you.
Ask for waiving a late fee or interest.
There is a possibility that your creditor may waive a late fee or interest to get full payment. This will motivate you to pay the amount immediately or within a shorter period of time. Your creditor might agree to this because it benefits both you and them. However, if they do not agree to this, consider other sources to pay the debt.
Make room for emergency fund savings.
When you are paying off debt, you should not think about general savings to buy things that you desire but do not need. However, you should never forget about emergency funds. Generally, three to six months’ expenses are funded into emergency savings, but even $1000 or $2000 works. If you do not have these funds, you might need to take more loans during emergencies, putting you deeper into debt.
Get everything in writing.
When you and your creditor decide on a payment plan, ensure you get everything in writing. It should be a properly drafted contract signed by both parties. When you pay off the entire debt, ask for a written confirmation of that too to avoid fake allegations. An attorney can review the payment plan for you before you agree to it so that you do not make any wrong choices.