How to Save Money on Debt During an Economic Crisis
- Author: Bryan Miller
- Posted: 2024-10-02
With the recent financial turmoil, many people are likely suffering as their livelihood is impacted by the national emergency. People who are in debt face the prospect of not being able to pay back what they owe. However, if you are able to, there are some opportunistic steps that you can take to save money on your debt payments and possibly get better terms. Some of this stems from the fact that your creditors may also be in economic distress and have no interest whatsoever in your defaulting on your debt. This means that you may actually have some leverage and do not have to be at the mercy of debt collectors.
Negotiate Better Terms with your Creditors
One of the things that you can do at a time like this is to attempt to negotiate with your creditors. They do not want a bankruptcy filing because they are then not able to take any steps to collect on your debt to them while the case is proceeding through court. They may be fortunate to get pennies on the dollar if you do end up having to file. While they will not write off your debt to them, they may be willing to give you additional time to pay or offer you more generous terms. You may even be able to offer your creditor a lesser amount to settle your debt so they are assured of getting something from you. There are even many stories of people being able to lower their debt with credit card companies through negotiation.
Your creditors may end up being flexible with you because it is the best way for them to get paid. If they are too difficult or demanding, you can always file for bankruptcy and then debt collection is out of their hands. When you know this and are able to leverage it, you gain the confidence to try to get a better deal.
If your debt is in the hands of a collection agency, you can also try to work with them. Some of these creditors have bought your debt for pennies on the dollar so even getting some money out of you is a big win for them. Make sure that they agree that whatever you pay discharges your debt so you are not stuck paying them beyond the amount that you agreed. When economic times are rough, debt collectors are even more willing to work with you so they can have some revenue filling their coffers. Debt collectors who work on commission may be less willing to concede on the debt since they are still collecting the debt on behalf of someone else and are working on commission.
Consolidate Debt at Lower Rates
Another step that you are able to take that could set you up for a better situation when things finally turn around is to consolidate your debt into one new personal loan with a lower interest rate. The current economic crisis has caused interest rates to tumble, and you can take advantage of this when you qualify for a loan. This will lower your monthly debt payments and give you one payment each month as opposed to juggling many different payments at once. The downside to this is that some lenders will be much more stringent in deciding who is able to qualify for these loans since they are concerned about giving credit to risky borrowers. However, if you are able to take advantage of this, it can give you extra money to use towards further debt reduction or to add to your rainy-day fund.
If you are unable to obtain a debt consolidation loan, you can take advantage of lower credit card interest rates to cut your payments. You can do one of several things to accomplish this. First, you can use the threat of a balance transfer to persuade your existing credit card lender to cut your interest rate. They do not want to lose your monthly payments so they may be inclined to be flexible. You can also find a lower interest balance transfer to get lower rates than what you are paying now. However, you need to be careful that the low introductory teaser rates that you are offered are not suddenly raised in the future. The lower rate on your balance transfer can also save you money that you can use to cut your debt.
