Dear Mary: A year ago, I emailed you about the mess I was in with payday lenders. Although I had been a member of Debt-Proof Living for years and knew better—and I am a professional with a masters degree and excellent job—somehow, little by little, I got caught up in the downward spiral into payday loan hell.
I was so desperate, I was planning to use one of the companies that advertise as “helping” a person pay these off these loan sharks. Thankfully, I contacted you about this first, and you warned me not to use them. I contacted NFCC.org, the organization you recommended, and found a CCCS office not far from my city (Graceworks CCCS in Dayton, Ohio).
It has not been easy, but I am thankful to report that I have paid off almost $10,000 in those loans and only have two more to go! I can’t begin to tell you the relief I feel.
Every time I drive by one of the lenders, I get a knot in my stomach and want to run into the store and shout a warning to the people who are borrowing. I keep my focus by remembering the horrible feeling at the end of each month, when I got paid, and then having to make my rounds to each of the companies, juggling my money so everyone got paid, and ending up with less money for bills every month.
Praise God for the advice you gave me and for your daily encouragement and help you give me through your daily Everyday Cheapskate column and Debt-Proof Living monthly newsletter. Thank you so much. Name withheld
Dear NWH: You deserve a huge round of applause, and I’m pretty sure lots of readers are joining me in that. I am so proud of you for taking full responsibility, seeking out reputable help and then digging in to do the hard work. You are almost there, so don’t let anything keep you from finishing well. Thanks for letting us know about this amazing progress. By the way I love the name of the group you are working with because, well, grace works!
Dear Mary: Earlier this year I inadvertently underpaid one of my monthly credit card accounts by $30. They penalized me by increasing my interest rate and wanted me to pay more than $400 the following month. I didn’t have that kind of money so I didn’t pay it.
I called and customer service offered to put me on a hardship plan with lower payments of $250 a month for six months. I did that and now they are charging me 32% interest on over $9,000. I cannot afford to make the payments. I will never be able to pay it off at this rate. I did nothing wrong except under pay in one month.
I recently joined a program that will negotiate with my creditors on my behalf to pay less than I owe. They told me to not pay my other accounts which were in good standing for 6 months to let them “age.” Now my credit is really bad. I don’t know what to do. Please help me. Rosa
Dear Rosa: Underpaying a credit card account is about the same as not paying at all for all the damage it will do. You allowed your account to become delinquent. Had you restored the $30 under payment plus penalties in the following month you probably would have been okay. But since you didn’t, your company slapped you with an interest increase to 32 percent. Ouch!
By accepting byt reduced payments, but you have to understand that you were not even paying the interest each month. Instead of your balance going down, your balance grew each month by the amount of unpaid interest. Now it is like a runaway train. I am so sorry you got suckered into signing up with one of those slimy negotiation outfits. For them to have advised you to stop paying your other creditors to allow your accounts to “age” was ludicrous, if not illegal. What they’re doing is making you look like you’re one step from bankruptcy so your creditors will be more “cooperative.”
Now that I’ve managed to depress you even more, let me give you a positive suggestion: Please go to National Federation for Credit Counseling (NFCC.org or call 800-388-2227). You will be connected to a reputable CCCS credit counseling office in your area run by folks you can trust. You must understand that you have done great damage to yourself by believing this company that said you should stop paying your bills. If anyone can assist you in turning this around, CCCS can. And if not, they will advise you on your best course of action.