Author: Sahel Tamayo

Embarrassment is probably the first thing you will when you cannot pay your bills. And when you are embarrassed, it is easy to give in to the temptation of hiding and running away.

Unfortunately, that is the worst decision you can ever make. This kind of financial problem is something that you need to face and deal with head-on. 

Here are some tips on what to do when paying your bills goes out of your reach:

Ditch the Non-essentials 

Check your list of expenses and get those that you don’t need for survival. You have to let go of paid memberships, additional phone features, newspaper subscriptions, satellite or cable, and streaming services until you find solid footing with your finances. 

Make Your Bills Your Top Priority 

If your money is still not enough for paying your bills, you have to decide on the bills you will pay now and those that need to wait. Review your list of monthly expenses then prioritize those items that are crucial for your existence. You must include things such as your mortgage or rent, insurance, and utilities. Your next priority should be your secured debts such as your home equity loans, car loans, and other debts attached with collateral. 

Your least priorities are your unsecured debts. These include things such as personal loans, credit card debts, and the majority of service-related bills. After you have prioritized your bills, list down the bills that you won’t pay right away. 

Look for Ways to Make Money 

Skipped payments and late payments can take their toll on your credit score and might make you lose your car or home. Do your best to earn the amount of money you need for covering that gap in your budget. Start a side hustle, take on a second job, sell some items, and do pretty much anything in your power so you can have your bills paid on time. There are now many ways to make money fast and you need to exhaust all your options before deciding not to pay your bills at all. 

Renegotiate Your Medical Bills and Student Loans 

If you are still paying off your medical bills or student loans, you might negotiate new terms for repayment to free up some money. You can place federal student loans in deferment or forbearance if you are really in a tight spot. This will let you stop making payments in the meantime or reduce your payments. 

It is much easier to renegotiate medical bills. You just need to get in touch with the accounting office, discuss the amount that you can afford to pay, and most of the time, they will be willing to work around that. 

Talk to Your Creditors 

After doing everything you can to lessen the damage, it is now time for you to inform your creditors of what is happening. Call them before the due date of your bill and explain your current situation. This call wouldn’t be a happy one but it can help you stay out of trouble. 

HELOC or home equity line of credit is a big help for most people. This helps you use your home’s equity and borrow against its value. HELOC funds can be used for pretty much anything as long as you don’t forget that your home will serve as the collateral here. 

Below are top reasons to use a HELOC:

Pay Off Existing Debts

HELOC may have a lower interest rate than some credit card debts with high-interest rates that might leave you struggling. You can make your payments simpler and lower your interest costs if you consolidate all of your higher-interest debts and pay them off with your HELOC. 

Home Improvement Projects 

It is probably one of the most common and popular uses for a HELOC. You can increase or maintain your home’s value through home improvements in the form of repairs and renovation. There are several home improvements known to give greater returns on investments such as kitchen remodels, siding replacement, bathroom remodels and additions, space repurposing to add to your home’s square footage, and energy efficiency improvement. Meanwhile high-end remodels or pool installation might not give the best ROI. 

Tuition and Other Educational Payments 

A HELOC can also help you with better management of the costs related to a college education or private school for younger children. Your home equity line of credit also lets you access funds whenever you need them the most. You could borrow when due to the tuition payment comes and pay it later and borrow once again if another expense arises. 

Long Term Care Expenses and Medical Bill Payments

Health is one of the biggest issues in most countries across the world now more than ever and sadly, not all people are backed by reliable health insurance. It can lead to colossal amounts of medical bills. If your budget is limited, you need to search for other ways to pay your medical bills. This is yet another instance when a HELOC can come in handy. You can use this to pay your medical bills and pay them off later on. 

It also applies to long term care expenses. Most people have elderly parents who live longer and require long-term care that can be a serious expense for the family. You can also pay for such expenses with the help of your home equity. 

Down Payment for a Second Home or an Investment Property

A lot of people don’t realize that they can actually use a HELOC to help them buy a second home or investment property. If you already built up plenty of equity in your existing house and you want to raise some funds for a down payment for another property, the most logical solution lies with a HELOC. 

Extra Cushion for Emergencies 

There are times when unexpected things happen and you end up with a financial emergency. Your furnace might have died down, your roof developed a major leak, and your car needs some serious repairs. In cases like this, it wouldn’t hurt to have available funds that can help you pay for these unforeseen events with no need to use up your savings. 

These are just some of the top reasons to use a HELOC. Make sure you use it well to make the most out of your home equity. 

Do you still get some debt that might stop you from enjoying the holidays? Do your loan payments hold you back from achieving a bigger financial goal?

Here are the top 3 ways to pay off your debt fast so you can enjoy your finances to the fullest:

1. Start By Paying Off High-Interest Rate Loans 

The general rule of thumb when it comes to debts is to make it your top priority to pay down those debts that come with the highest rates of interest. Through this particular strategy, it will be possible for you to pay off your debts faster with lesser overall interest down the road. 

To make it possible, you might want to make minimum payments on the rest of your accounts with lower interest. Then, once you have paid off your highest interest rate loan, you can now apply this minimum monthly payment that you would have otherwise spent on the highest interest rate loan to your next loan with the highest interest rate. This cycle continues until you manage to pay off everything and be free from debts completely. 

2. Go for Biweekly Payments 

A very popular strategy to speed up debt repayment is through making biweekly payments or every two weeks wherein each totals half of your payment every month. One important thing to remember is that this particular method means you need to make a total of 26 payments every year that is twice more than you will make if your payments are made every first day and middle of the month. This is why it is a must that you budget accordingly. 

One significant advantage of this is that you can lower the amount that you owe at a faster rate that will allow you to save on interest. A biweekly schedule can also lessen your cash flow concerns as this will result in an even distribution of smaller payments for the whole month. 

3. Loans with Smallest Overall Balance Should be Your Priority 

Another good strategy for repayment that you might want to try is known as the debt snowball method. With this particular method, the main idea is for you to pay back the loans with the least total balance first before redistributing the money that you might have spent on these payments to the rest of your larger loans. Getting rid of your smaller debts as fast as you can help you maintain your motivation to continue paying off your bigger debts. Once done correctly, this can lead to a faster period of repayment and less overall interest paid.

Bonus Tip: Pay Your Debt in Lump Sum

If you are in luck and you received a nice bonus check that you don’t know how to use, you might want to make a single large payment for your debt, whether it is your mortgage, credit card debt, or auto loan. 

Once you have paid off your debt, your money will give you a guaranteed return and this is the amount of interest that you would have otherwise paid on your outstanding balance. 

Refinancing is one of the most appealing ways to reduce the costs of your auto loan. The extra cash you can get here can be saved for your future or added to your monthly budget. But, should you refinance your auto loan in the first place?

Auto Refinancing Defined 

When refinancing your auto loan, you are basically paying off your original loan’s balance then getting a new loan to replace it. There are times when changing lenders might be necessary because many lenders are not going to refinance their own loans. But, auto loan refinancing will help you lower your payments every month or adjust the term of your loan. 

There are three situations when it makes perfect sense to consider auto loan refinancing. 

1. You Want to Lower Your Monthly Payment 

If the monthly payment for your auto loan is quite high, refinancing can reduce this cost every month. When you pay your original loan longer, your principal balance will also be lower.

 This means that if you will start a new term with this balance, the leftover funds are going to be spread out over a new period of time. You can lower your payment every month if you extend the term of your loan if you receive a lower interest from the lender or both. 

It is usually one of the reasons why borrowers decide to refinance. A smaller payment every month can help you with your monthly budgeting. 

2. You Wish to Lower Your Interest Rate 

You might be stuck with an auto loan with a higher interest rate because of various reasons. However, this will still cost you hundreds or even thousands of dollars during the life of your loan. 

For instance, you borrowed $20,000 for a car for a 60-mont term at a 6% interest rate. Throughout the life of your loan, you will pay an interest of almost $3,200. If you apply for the same term and loan but this time, it has a 3% interest rate, you will only be paying a little less than $1,600 in interest during those five years. Although this might not sound significant enough when you first took out the loan, the interest can add up after some time. 

3. You Want to Add or Remove a Co-Borrower

You will only be able to add or remove a co-borrower from a loan if you can refinance under the name or the names of the people who should be part of the loan. One very common reason for removing a co-borrower is if a person cannot be approved because of their personal credit history and the only choice left is for them to co-borrow. This time around, the person has already established their credit history and is already confident that they will be able to get approval all alone with no need for a co-borrower. 

Refinancing your auto loan can make perfect sense during the above situations. However, don’t forget that just like anything else in the world, there will always be risks involved so make the necessary considerations before you decide once and for all. 

The income level is the primary dividing line on whether you will file for a Chapter 13 bankruptcy or Chapter 7 bankruptcy. 

It simply means that those who fall below a specific level of income are qualified to file for Chapter 7 bankruptcy. Chapter 7 bankruptcy is often simpler and even takes lesser time compared to Chapter 13 bankruptcy. The majority of bankruptcy cases are actually Chapter 7 cases and the rest are Chapter 13 bankruptcies. 

But beyond the cutoff on income, the differences between Chapter 13 and Chapter 7 bankruptcies can easily confuse those who are not familiar with them. 

Here is a quick explanation of the difference between Chapter 7 bankruptcy vs. Chapter 13 bankruptcy. 

Differences in Terms of Car Loans and Mortgages

This is among the main differences between Chapter 13 and Chapter 7 bankruptcy. With Chapter 7, it is likely that you need to return the car or house to your creditor or arrange to pay the wholesale value of the item. With Chapter 13, you might be able to keep the care or house provided that you stay updated with the payment system ordered by the court. 

Differences in Having a Past Bankruptcy 

You need to wait 8 years after filing your first Chapter 7 bankruptcy. On the other hand, you just need to wait 2 years after filing your first Chapter 13 bankruptcy before you can get another discharge. 

Differences in Debts Owed for Student Loans, Alimony, and Child Support

Chapter 7 bankruptcy will not discharge your debts and you cannot also avoid your support debts. If it is impossible for you to pay off the said debts by the end of your Chapter 13 bankruptcy, you are still going to owe the rest of the balance even after the end of the bankruptcy. 

Differences in Nonsupport Debts Owed in Agreement, Property Settlement, or Divorce

Once the creditor, usually the spouse, raises an objection, the debt is not going to be discharged unless you can show that you still cannot pay the debts following a bankruptcy or that the benefit of removing the debt is beyond the damage that is caused to your creditor. On the other hand, any balance that remains once Chapter 13 bankruptcy ends are going to be erased. 

Differences in Having Nonexempt Valuable Property

With Chapter 7, you need to surrender the nonexempt valuable property that you have except if you pay the property’s fair market value to the trustee or you exchange an equal value property provided that your trustee agrees to it. With Chapter 13 bankruptcy, you will be able to keep the nonexempt valuable property that you have. 

Differences in Debts Owed Due to Previous Crimes

With Chapter 7, it is not likely for your debts to be discharged once the creditor objects and demonstrates your past actions. Meanwhile, even though you are required to pay for these debts as part of your Chapter 13 plan, this balance could be wiped out once the remaining debts are not completely paid by the end of your Chapter 13 bankruptcy. 

These are just some of the many ways that Chapter 7 and Chapter 13 bankruptcies are different.