6 Steps and Strategies to Dealing with Debt
So, let's talk about 11 tips that will help you get out of the debt hole. Spoiler: we do not offer any magic ways to get rid of debts. We offer only legal and generally accepted methods of how to make your life easier and pay off debt with minimal consequences for your credit history and wallet.
Do not console yourself with false hopes
Immediately throw out of your head thoughts that the bank will simply “forget” about you. It won’t. And it will not forgive the debt. Banks do not like to lose money and they write off bad debts only if they understand that there is nothing to take from the borrower. But this happens extremely rarely and does not end with anything good for the borrower.
And still no one will help you just get rid of debts. And all these ads kinda “We will help get rid of debt” are nothing more than an ordinary scam. You pay the scammers, and then you pay the bank.
It is better to immediately go to constructive ways to solve the problem, and do not rely on a miracle or a bad memory of the financial structure.
Do not try to take a new loan in other banks to repay the existing loan
The first desire that arises in the coming delay is take a new loan. And it doesn’t matter where - in the bank, from friends, parents, and so on. But we will tell you right away - no need to do this. Because you will only get more debts...
If you have problems with the source of income, then you must first solve them. Because it is impossible to constantly borrow from someone in order to repay a debt to another bank or person. This path leads straight into the debt hole because almost every loan will be subject to interest, and in case of delay - fines and penalties. Do you need it?
We’ll clarify right away: this advice does not concern refinancing. But this is a completely different type of loan, which you also need to carefully handle when applying.
Do not delay the problem recognition process
Yes, we understand that four more stages must pass before the stage of “accepting the inevitable” - denial, anger, bargaining, and depression. But frankly speaking, the bank does not care. It is important for lenders that you keep them informed of your problems. And if you understand that you cannot make the next loan payment, immediately contact the creditor and tell about your problem.
The faster you contact the lender, the greater the chance that you will get a little delay on payment and avoid damage to credit history, fines and stumps, negative attitudes and so on.
Do not run away from debts and do not hide from the bank
No matter how absurd it sounds, the bank is your best friend when repaying a loan. There is no need to hide from it. Try to keep in touch, report your problems and communicate. Bank managers often try to somehow help solve the problem.
Keeping in touch with the bank, you can try to come to a mutually beneficial solution. And then you get the desired delay and the bank can get your money. So remember: it is beneficial for you and the bank to cooperate. Therefore, do not run from the bank, but communicate.
By the way. If you have at least some money, but it still isn’t enough for the minimum loan payment, make a payment anyway. This will show the bank that you are having difficulty but are still willing to pay. At least a little.
Collect all the documents that may help
The bank is much more willing to help you if you show why you cannot return the money right now. If your lack of money is connected with completely objective reasons (reduction, serious illness, loss of a breadwinner, and so on), then you can easily confirm this with documents.
What papers will you definitely need:
- If you have been fired: employment records;
- If any of the sources of income is missing: income tax certificate and all related documents, if any;
- If you are not paid a salary: a statement on suspension of work, a lawsuit in court on non-payment of salaries;
- If you get sick: certificates of sick leave, extracts from a medical record, medical documents and checks (if you have performed any operations or procedures for a fee);
- If a disability occurs: disability certificate, extracts from a medical record;
- If the co-borrower has died: death certificate;
- If what brought the income is damaged: the relevant documents (for example, the accident report, if you are a taxi driver, or confirmation that the apartment you rented burned out);
- If a baby is born: birth certificate.
In general, collect all certificates, statements and other pieces of paper. The more pieces of paper you get, the better. And then attach them to your application to the bank, in which you will write what specific problems you have and what specifically you are asking.
Try to agree on more convenient terms or concessions (restructure loan)
Banks are not collectors from the "nineties." You can negotiate with them. There are even several special tools for this. The most convenient one is restructuring. It allows you to amend the contract, which will soften the terms of the loan.
With the help of restructuring, you can:
- Extend the loan term. Accordingly, you can reduce the size of monthly payments. But this will increase the size of the overpayment;
- Reduce the interest rate. This will reduce the size of the monthly payment and reduce the overpayment, which is very convenient.
As a rule, one of the restructuring options is used. But if the problems are serious and the bank is good, then several options can be used at once - for example, extension of the term and reduction of interest.
A competent and polite dialogue with the bank is what you need to get a restructuring. Support all your words with references and documents. Prove that your income has decreased - bring a 2-personal income tax certificate from the tax or salary slip from the place of work if you have cut the income.
Important! Always soberly assess your capabilities. If you have agreed with the bank on specific conditions (for example, a delay of three months) but could not fulfill the obligations, then no one else will help you. Therefore, carefully consider the arrangement.