When the money in your bank account just won’t go far enough, it often comes with bouts of panic, stress, and sleepless nights. None of these reactions help you learn how to pay bills when you’re broke.
Maybe you’re having a difficult time finding employment, had an unexpected expense, or simply lost control of your finances. This happens to all of us at one time or another, but bills still need to be paid.
If you’re down on your luck, these five steps will help you minimize the fallout from non-payment.
What to do when you can’t pay your bills
1. Take account of your situation
Take a look at the cold, hard facts. What caused you to be in this situation in the first place? Maybe it’s human error and can be easily fixed. Perhaps it was a financial emergency that you couldn’t have planned for.
Log into your bank account and perform a quick audit of all your transactions, deposits, and expenses. If you have trouble paying your bills, you’re likely overspending or not earning enough.
If overspending is the problem, create a budget and start reining in your spending. Track each of your transactions and vow to cut back.
If you’ve already trimmed your spending as much as possible, you might be struggling with a lack of income. It may be time for you to move to a cheaper place, find a better-paying job, or take on additional work on the weekends.
Whatever the case, take account of the situation and pinpoint the source of the problem. Figure out why you can’t pay your bills and find solutions to remedy it — this is the only way you’ll be able to move forward successfully.
2. Understand the consequences
The longer you wait to pay your bills, the more dire the situation will become.
Any past due bill will negatively affect your credit report. It will show up as a derogatory mark on your credit history and cause your credit score to decrease. The damage worsens the longer the bill remains unpaid; this is why it’s important to pay any amount of money towards your bills that you can, even if it’s not the entire amount.
Not paying bills on time also means incurring late fees, past due charges, and additional interest. This can increase the amount you owe until it snowballs out of control.
If the bill is delinquent for long enough, creditors can sue you for unpaid credit card accounts, medical bills, and other personal loans. Any assets that are associated with debts, such as a mortgage or car loan, can be repossessed by the bank to cover the remaining amount.
For these reasons, it’s vital you take action as soon as possible to reduce the overall impact of not being able to pay your bills on time.
3. Organize bills based on importance
Make a list of your bills, starting with the essentials. Making sure you have food to eat, a roof over your head, and clothes to keep you warm are vital parts of survival, so start with those necessary expenses first.
Keep a tally of each bill’s balance and the number of days the bill is overdue. Write out any fees you’ve incurred so far or interest you expect to pay. Go down the list and get the contact information for each company so you can ask about payment options.
Some utility companies offer discounts or subsidies for low-income customers. You may be able to take advantage of this or other federal assistance programs to help get back on track.
4. Contact the companies you owe
Creditors are not as scary as you may imagine. They want to help you so you can continue paying your bills.
Call up each establishment and plead your case. If nothing else, they may be able to grant you an extension to pay your bills at a later date, giving you more time to earn the necessary money.
Once you come to a modified payment agreement with a company, make sure you get the new terms in writing. This will ensure that everyone is on the same page and that there are no misunderstandings in the future.
5. Consider more drastic options
Not being able to pay your bills is a scary situation and may take some out-of-the-box thinking to get back on track.
Are there income or housing benefits you could apply for? What assistance programs can you check out? Check out Benefits.gov to review federal programs that could help you.
Friends and family may be able to help with childcare so you can take on an extra job. It doesn’t hurt to ask for help — everyone needs it at one time or another.
How to pay bills when you’re broke
Not having enough money to pay bills is something most people have faced at one time or another. The important thing is not to let it get any worse and to deal with the situation head-on.
Once you get back on top of things, create a plan to avoid this same mistake in the future. You can combat emergencies and other unknowns by saving an emergency fund — contributing just $10 per week will add up.
Good financial habits start small and develop over time. Take a deep breath, be proactive, and you can learn how to pay bills, even when you’re broke.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|