Can’t Make Your Next Credit Card or Loan Payment? Here’s What to Do

Unexpected events can often leave us scrambling to cover our debts. Whether you lost your job, have an unexpected medical expense, or life just happened, it can be scary to know what to do. Often, when we can’t afford to pay our bills, we panic and ignore the problem, but that can only increase the delayed difficulties.

If you find yourself unable to make your next credit card or loan payment, there are steps you can take to address the situation. Here’s a guide to help you navigate through this challenging time.

Understand your situation

First, take a deep breath. The sooner you take stock of your current situation, the faster you can start taking the steps needed to get your finances back under control.

Take a look at your financial picture. Here are a few questions to ask yourself:

• If you can’t make a minimum payment, how much can you afford to pay?
• How long do you anticipate having trouble? Has a long-term illness or situation occurred, or is this hardship temporary?
• What’s your monthly income, and when can you expect to be paid next?
• What are your total must-pay bills and minimum payments each month?

Jotting down the answers to these questions will be helpful when you call your creditors.

Contact your creditors

We get it. Your lender is one of the last calls you want to make when you’re behind, or about to be behind, on payments. But giving them a call is actually the best move to make.

Most lenders, Virginia Credit Union included, have more options to offer you the earlier you reach out and explain your circumstances. Be honest and upfront about your inability to make the payment.

Ask your lender if they offer any hardship programs, which might include temporarily reduced payments, waived fees, lowered interest rates, or other adjustments or services that can help you get back on track.

If your credit is with Virginia Credit Union and you know you’ll have trouble with an upcoming payment, give us a call. This situation may be new and scary to you, but your VACU team members have these conversations every day and are experienced in finding the best way to help members get back on their feet.

“Your VACU team members have these conversations every day and are experienced in finding the best way to help members get back on their feet.”

Explore your options

You have several options to consider when you’re unable to make a payment. Each has its own pros and cons, so evaluate them carefully:

• Smaller payments: Instead of making a full payment all at once, try breaking payments up into weekly or biweekly payments based on your pay periods. As long as the payments are made in full by the due dates, there are no penalties. If you are unable to make a full payment, pay as much as you can instead of not paying at all. This will help when you are able to try to catch up, and it will show your creditors good faith.
• Payment plan: Request a payment plan that allows you to pay off your balance in more manageable installments. This will likely come up as an option when you speak to your lender.
• Balance transfer: If possible, consider transferring your balance to a credit card with a lower interest rate. This can reduce your minimum payment temporarily.
• Debt consolidation: Consider consolidating your debts into a single loan with a lower interest rate to make payments more manageable.

Understand how missed payments impact your credit report

As you evaluate your options, it’s important to understand how late payments impact not only your monthly budget and debt, but your credit report and credit score.

Lenders typically report late payments to credit bureaus after 30 days past the due date. Once reported, this negative mark can lower your credit score, making it more challenging to obtain favorable loan terms in the future. A late payment can remain on your credit report for up to seven years, potentially affecting your ability to secure credit or loans with attractive interest rates. And that seven-year clock only starts once you’ve made the late payment.

To avoid these negative impacts, try to make at least the minimum payment by the due date, or within 30 days, whenever possible. Proactively communicating with your lender to explore available options can mitigate the impact on your credit history.

 Pro tip: be wary of third-party debt solutions. While other solutions to resolving your crisis might be tempting, they usually include a lot of fine print — and significant risks. Be wary of offers that seem too good to be true. It’s typically best to work directly with your original creditors rather than a third party, who may charge large fees or burn bridges with future creditors.

Reset your debt payoff plan

Gaining back control of your finances will take work, but it’s worth the effort. Here are a few best practices that will help you stay on top of your financial situation moving forward:

• Automate payments directly from your checking account
• Review your budget and spending regularly to ensure they match up
• Build a long-term financial plan that aligns with your income and goals
• Check your credit report on an annual basis to ensure it’s accurate