Your One Stop Resource for Saving Money.
Advice if Struggling with Small Debts - The Bills.com Blog
Bills.com Blog > Debthelp Questions > Struggling with Small Debts
Advice if Struggling with Small Debts
Question: My fiance' has put us into debt with small signature loans.There are about 6-10 of them.They equal to about mabe 2,000.00 or so. He is the only one working and I get social security and we can't seem to get out of this hole we are in. We have never filed bankrupt,or home loans or anything like that. We don't know what to do or how to go aboutit. Could u please help and let us know what step we need to take to be stress free of these bills. Thank you.
Answer: First, I want you to know that while the debt you are facing may seem insurmountable right now, it is really not much debt, and you should be able to dig yourself out of this mess without too much difficulty. The primary problem with small signature loans and payday loans is not the amount of the loans themselves, but the exorbitant interest and fees that these lenders charge borrowers who are not able to repay the loans within the specified time period. Frequently, the interest and fees on these small loans can more than double to amount owed in a matter of weeks. Given these high interest rates, I would encourage you, if possible, to borrow the money needed to repay these loans from a family member or friend, or even from a regular bank if the interest rate charged on the loan is reasonable. I am not sure of your or your fiancé’s credit rating, but if your credit rating is decent, you should be able to obtain a $2000 personal loan from a reputable bank at a fairly low interest rate; the interest rate would almost certainly be lower than that currently being charged on these signature loans, thus allowing you to repay the debt over a longer period with less interest accruing on the debt.
If you are not able to borrow the money needed to repay
this debt from a friend, relative, or a bank charging a lower interest rate, you may have no choice but to work with the current lenders to try to repay these debts. I would encourage your fiancé to contact the lenders to explain his financial hardship and to request a reduction in the interest rates and modification of the repayment terms. Even if you cannot afford to pay as much as you or the lender would like each month, you may be in luck in regard to your difficulty in repaying these loans. There are eight states whose payday loan regulating statutes require lenders to set up an installment repayment plan if an account reaches the maximum number of rollovers allowed by law and the debtor declares that he/she is unable to pay the balance due. Check out the payday loan information from the Consumer Federation of America at http://www.paydayloaninfo.org/, where you will be able to read all about these loans and the various state attempts to regulate them. Follow the “state information” link to find out the specific regulations for payday lenders in your state, and if you live in one of the eight states requiring installment payments. If your state does require repayment plans, and the lender still won’t accept payments, call your state regulator of payday loans, usually an assistant Attorney General, and complain.
You should get the results you want after the Attorney General’s office becomes involved.
If you are not in one of those states, you may want to consider simply making payments to the lender of whatever you can afford to pay down the balance of the loan over time, paying as much as possible over the minimum payment due to the creditor charging the highest interest rate. Once that account is paid off, start paying extra to the lender with the second highest rate. Given the relatively small balance of these debts, you can hopefully pay them off within a matter of months. In most states, the rollover limit on delinquent loans will soon be reached, and the interest rate the lender can charge will be capped by state law. If the lender will not accept your payments, simply put what you can afford aside each month until you have enough money to either pay off the loan or to offer a settlement. Read up on the regulations in your state to find the best strategy for your situation.
For more information for consumers struggling with debt, I encourage you to visit the Bills.com Debt Help page.
I wish you the best of luck in resolving these loans in an affordable manner, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
User Comments
Submit questions/comments about this post:
Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!
© 2006 - 2008Bills.com LLC. All Rights Reserved.
1. Posted by Kerry on Monday 18th August 2008 12:33
I am a single mom on a 13 year old and a 7 week old. The baby's dad ran off with my savings. I'm starting over and have ruined my credit in the past 3 months. I am now stuck with $2500 worth of hospital bills as well as my other debt. The problem I am having is that there is 8 or 9 small bills $150 or so, as well as the larger ones $1,000. I make small $15-$20 payments on each one but the hospital turned one over the a collection agency already. I need to consildate the bills so I'm only making one payment a month for all the bills. A loan is out of the question and I feel like I'm sinking instead of treading water. Is there anyway I can get my hospital bills down to one easy payment? My credit can't afford to take another hit! Thanks, Kerry
2. Posted by Bill on Monday 18th August 2008 18:27
Getting a loan to consolidate the medical bills is going to be a difficult proposition. Most of the debt settlement programs have a minimum required debt of $7500 or above in order to qualify (medical debt qualifies for debt settlement). My suggestion is to approach a family member or a close friend who will be able to loan you the money, and you can make the one monthly payment to them in turn. Another source you might want to try is www.prosper.com. Prosper is a peer to peer lending community, and if you post your request there, there might be people sympathetic to your cause and willing to lend you the money, albeit at a higher interest rate. Hope that helps.