How to handle a debt collector
INQUIRER.netLast updated 09:00am (Mla time) 07/31/2007
Question: I’m ashamed to admit it but I am deeply in debt and have collectors calling me at home and at the office. I’ve made promises to pay that I know I won’t be able to keep – at least not with all of them. How can I handle this situation better? - Name withheld upon request
Answer: Face the problem head on. Don’t run away. That will worsen the situation. Running away from your creditors will reflect badly on your credit history and may bring about lawsuits, worsening the problem further.
The good news is, there’s a lot you can do about your debt problem now. Here are our tips to handling your debt situation better:
- 1. Assess how much you owe. List down all your debts including interest. This will give you a detailed picture of your situation. Identify the debt with the highest interest rate and target to pay that off first.
2. Assess how much you can pay. Make a monthly budget of your expenses if you don’t have one, then see how much you can set aside to the payment of your debts. You don’t have to pay off all your debts in one lump sum; that may affect your day-to-day living. Commit instead to set aside an amount regularly for debt reduction.
3. Talk to your creditors or their representatives (usually a collection agency) one by one. Pick up the phone and call them. Tell them of your situation and let them know how much you can pay them monthly for the next several months or years. More often than not, they will listen and allow you to stick to your debt payment plan since at the end, all they want is to get paid.
4. As soon as you get your paycheck, take out the amount of money you have set aside for debt repayment and pay your creditors. If you’re busy, pay online or by phone. Don’t make your busy schedule an excuse. If you do it a day later, you’ll be charged additional interest for the extra day.
5. Stop racking in more debt. Until you get out of your debt hole, avoid making new purchases or assuming any other new debt. Your goal is to be current in all your payments and wipe out all overdue balances.
6. When you get a windfall, say a bonus or 13th month pay, use it to pay off debt. Doing so will accelerate the wiping out of your debts.
7. Think of ways to raise extra money. get a part-time second job such as teaching or tutoring on weekends or bake cakes to order. Or sell off personal stuff you can do away with, such as a treadmill or bike you don’t use or an extra computer. Then use this extra money to pay off debt.
8. Consider taking in a low-interest debt to pay off higher-interest debt. It would be a good idea to take out a salary loan from the SSS or GSIS and use the whole proceeds for the payment of your debts. The loans from SSS or GSIS offer low interest and reasonable monthly amortizations.
9. Lower your spending. Look at how you spend your money every month. You might see some expenses that are not really necessary. Instead of taking a taxi to work, for instance, take the MRT, or carpool with an officemate to save on gas. When giving gifts, opt for homemade gifts instead of store-bought ones. Instead of going to the cinemas to watch a movie, rent a DVD instead. If you cut back on your spending, you will have extra money that can be used to further pay your debt.
10. Commit to be a better consumer from now on. Before buying anything, ask yourself if the item is a need or a want. If it is a want, put it aside first until you can really afford it and you are free from debt. Also, compare prices before buying. Do not hoard even during sale season; buy only what you need.
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