What happens when you can’t pay down your debts
With inflation making everything so expensive, you may struggle to pay your debts. What happens when you fail to make your payments (both on time and at all) can depend on what kind of debt it is. Failing to make mortgage payments, for example, is a lot worse than failing to make credit card payments. Here’s what happens if you can’t pay down your debts.
The Debt May Go to a Collection Agency
If you are more than 30 days late on a payment, your lender will reach out to you to seek payment. If you miss payments for several months in a row, your lender may send your debt to a collection agency. That agency will earn a big commission if they get a payment from you, so they will do whatever they can to collect.
The Agency Will Contact You
There are few people more motivated than debt collectors. They will try to contact you relentlessly. If you can settle the debt with them, your problem will go away quickly. It’s best to try and work out some type of plan. That’s because if your debt is tied to your house or car, it could be taken away. Debt collectors are forbidden by law to do things like threaten jail time, harass you with repeated contact, and more. If any of these things happen, contact the FTC right away.
Your Credit Score Will Drop
Your credit score will take a hit if you can’t pay down your debt. As US News reports, even just one missed payment can reduce your score by triple digits. If your debt goes into collection, your score may drop even more.
The Impact Can Last
Failing to pay down your debts can have deep and lasting impact to your credit. However, it doesn’t have to be that way. Try to form a plan to make even the smallest payments so that your problem doesn’t get out of hand. Minimum payments aren’t a way out of debt, but they can help you preserve your credit. The more proactive you are, the better things will be.
Content by Savvy Money