When You Are Unable to Pay Your Loan

If you realize that you are unable to make necessary payments, try contacting your creditors instead of simply avoiding them. If you contact your creditors when you realize that you are unable to make payments, they may be able to negotiate better interest rates and payment schedules to fit your budget and lifestyle.

Also, if you need help from outside in working out a payment plan and a budget, contact your local credit counseling service. There are non-profit groups in every state that offer credit guidance to consumers. These services are available at little or no cost. Also, check with your employer, credit union, or housing authority for no-cost credit counseling programs.

I don't want to do anything that might put a negative comment on my credit report; I'm going to take a cash advance -- so that I won't fall behind.

Some people actually take cash advances on their credit cards to pay their other creditors "on time." It is better to accept a late payment than to borrow your way deeper into debt, just to pay for bills that you can't afford. Can you honestly convince yourself that borrowing more money to pay your bills puts you in a better financial position? What often happens is, you put yourself so deep in debt that it is nearly impossible to improve your situation without any negative marks being made on your credit report.

Since I have no assets, if I don't pay my bills, the creditors can't do anything.

Creditors may sue to obtain a judgment against you in hopes that one day you will own real estate or have money that they can demand from you. Chances are you won't be broke forever, and they will wait for the day (while their interest is building). Although collection activity might currently be quiet, your account will most likely be sold to another agency and the collection calls will start again.

If my debts get to be too much I'll just file bankruptcy.

Bankruptcy is a very serious matter. It is a legal case filed with the federal court that is a matter of public record. It can be reported for 10+ years, or the rest of your life if you apply for a loan, life insurance, or a job. Although bankruptcy is often a logical solution, it is not something to be proud of. Filing for bankruptcy hurts many people deeply for the remainder of their lives. Sometimes it's their only option, but that does not mean they think it's a joke or an easy thing to do. Bankruptcy is a hard pill to swallow. Once you file, you will always be "a person that filed bankruptcy." You can never take that back. For some people, it is a mistake they will always carry.

When You Are Unable to Pay Your Loan.