Finance

Here’s What to Do Before Debt Collectors Start Calling

Debt happens.

Most Americans have some sort of debt — and not all of it is good debt, like a mortgage, car loan or student loans, which are considered good investments.

Credit card debt, medical debt, overdue bills and high interest loans are just a few of the types of bad debt that can wreak havoc on your life. They can destroy your credit, snowball into even more debt and, yep, have the debt collectors hounding you to pay up.

So while it’s likely you’ll come across one of these bad debts in your life, there are steps you can take to make sure they don’t get out of hand — and to keep the debt collectors at bay.

1. Get Rid of Dings on Your Credit Report and Raise Your Score

What does your credit score have to do with debt? Turns out — it can be a major factor in you getting out of debt quicker.

If you have a low score with a few dings on your report, you won’t get access to decent interest rates on your loans. That means you’ll be paying more in interest and less on the actual loan amount — taking you sometimes years longer to pay it off and thousands of dollars more. If it’s a mortgage, the cost of your poor credit score could mean tens of thousands of dollars gone to waste.

The good news? A free website called Credit Sesame makes it easy to put your credit score on track to reach your debt-free goals. We even talked to one guy, James Cooper, of Atlanta, who used Credit Sesame to raise his credit score nearly 300 points in six months.*** He says they showed him exactly what to do — he was even able to open his first credit card.

What could adding 300 points to your score mean for your goals? It could easily save you thousands of dollars over the life of a car loan or mortgage.

Within two minutes, Credit Sesame will give you access to your credit score, any debt-carrying accounts and a handful of personalized tips to improve your score. You’ll even be able to spot any errors holding you back (one in five reports have one).

Make sure your bad credit doesn’t give the debt collectors more ammo to use against you. Sign up for free (it only takes about 90 seconds) and see how much you could improve your score.

2. Stop Paying Your Credit Card Company Insane Interest Rates

If you have credit card debt, you know. The anxiety, the interest rates, the fear you’re never going to escape and the debt collectors will set up camp on your doorstep forever…

And the truth is, your credit card company doesn’t really care. It’s just getting rich by ripping you off with high interest rates — some up to 36%. But a website called AmOne wants to help.

If you owe your credit card companies $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.

The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.

You don’t need a perfect credit score to get a loan — and comparing your options won’t affect your score at all.  Plus, AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.

It takes less than a minute and just 10 questions to see what loans you qualify for — you don’t even need to enter your Social Security number. You do need to give AmOne a real phone number in order to qualify, but don’t worry — they won’t spam you with phone calls.

3. Lower Your Bills to Avoid Missed Payments

If your bills are lower, there’s less of a chance you’ll miss a payment due to lack of funds. And no missed payments means no debt collectors calling you every single day. But a lot of these money-sucking bills are ones you can’t cancel.

Take your car insurance bill, for example. When’s the last time you checked car insurance prices, anyway? You should shop your options every six months or so — it could save you some serious money and help you avoid missed payments.

A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.

Using Insure.com, people have saved an average of $489 a year.

Yup. That could be $500 back in your pocket just for taking a few minutes to look at your options.

4. Try to Negotiate Your Payments and Get On a Payment Plan

If you went to the hospital without insurance or you haven’t met your deductible yet, doctors’ bills can be pretty steep.

Thankfully, doctors and hospitals can be willing to work with you. Some medical providers will offer a discount if you’re strapped for cash, and most are open to payment plans. So instead of $500 out of pocket today, you could be paying a little over $83 a month for the next six months.

While it doesn’t make the debt disappear (you are still liable for these payments), a payment plan makes paying off these debts more manageable and will keep the debt collectors off your back so long as you make each monthly payment.

Kari Faber is a staff writer at The Penny Hoarder.

***Like Cooper, 60% of Credit Sesame members see an increase in their credit score; 50% see at least a 10-point increase, and 20% see at least a 50-point increase after 180 days.

Credit Sesame does not guarantee any of these results, and some may even see a decrease in their credit score. Any score improvement is the result of many factors, including paying bills on time, keeping credit balances low, avoiding unnecessary inquiries, appropriate financial planning and developing better credit habits.


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