- Posted by Jeremy Bachmann
Our days and our lives are filled with ups and downs. One day you may get a great bonus or raise and the next day you may find yourself having difficulty meeting your financial obligations.
While not making payments on your various obligations such as your mortgage, credit cards, car payment, or utilities is a serious matter, there is always a solution that can work for you and the other party. Many utilities have discount programs for income-qualified consumers and can offer you a payment extension if you are having difficulties. Credit card companies may be willing to reduce your interest rate if you pay down some of your balance and are having difficulties. Mortgage lenders will often modify your loan terms to make your payments more affordable or to help you clear up past due payments.
Why Consumers Have Problems Making Payments
There are a number of reasons that can create financial challenges. According to a survey conducted by PennyMac of 300 homeowners who had fallen behind in their mortgage payments, 40% said they were unable to make their payments because of a reduction or loss in their income. Other main reasons cited by survey respondents was that their expenses had expanded out of control and exceeded their income and that they had marital problems.
Not being able to make payments stirs a lot of emotion in consumers. In the PennyMac borrower survey, 81% of people were embarrassed by not making their mortgage payments. People said in the survey that they were also felt scared, frustrated, upset, overwhelmed, guilty, worried and devastated. Most lenders understand these emotions and are open to working with you and helping you become resolve these feelings.
Preparing Yourself for Financial Challenges
The key to preparing for the inevitable downturns that life can take is to have a cushion. A cushion can take many forms, from a rainy day savings account that cannot be touched for any reason to living a lifestyle within your means. Financial managers often tell consumers that the savings account cushion should be at least 3 months of income. Lenders typically look to have borrowers maintain 6 months of payments in a liquid account (checking, savings, and/or investment accounts). Creating a cushion usually means that there are things that you will not be able to have. But, the cushion allows you to ride through difficult periods and, hopefully, sleep better at night.
What to Do If you Have Difficulties NOW
Creating a cushion may be a great thing once you are on firm footing, but if you are having difficulties today there are still things that you can do. Here are five good steps to follow:
- Contact Your Lenders It may be difficult and embarrassing to admit to someone that you're having problems, but most lenders are set up to offer you assistance. The earlier you call, the more they can likely help and the easier the process. Even if you're making your payments, but feeling strained, call and speak with one of their representatives. For PennyMac customers, our Loan Specialists are available seven days a week. Click here for our contact information.
- Look At Your Expenses & Make Changes – Review where you spend your money and decide on things that you can live without or that you can defer until you get on solid ground again. Do you really need to eat out three times a week? Do you need that $150 pair of jeans right now? Lenders are willing to help you, but you also need to change your life to ensure success on your path to financial recovery.
- Do Your Research – There is a wealth of information available on the internet to help you manage your debt. There are also national and local community groups that can provide assistance to those who are stretched.
- Know The Effect of Your Actions – Not making payments and living up to your financial obligations is a serious matter that can affect you today and for years to come.
- Contact Your Lenders – Yes, that was the first step. But, it is important to stress this step again. Communicating openly and often with your lenders is imperative to get a solution that works for everyone. If your lenders don't hear from you, they will assume the worst and pursue legal remedies as quickly as possible.