The Minimum Payment Debt Struggle

Debt happens when you can’t afford to buy what you want or need with your own cash and so instead you fund the purchase by using credit.

If you only pay the minimum payment on your debts and carry on buying things on credit, then you might just end up too broke to actually pay off your debts.

Making just the minimum payment on your debt each month may seem like a good idea so that you can spread the cost of a purchase over a period of time especially if you manage to get hold of a good low interest rate deal on a credit card.

But what happens if you keep on accumulating debt? Well, the minimum payment on your debts will get bigger too. All of a sudden you might find that your minimum payments are eating into your monthly budget and squeezing your finances way too much for comfort.

This can cause financial strain in many ways. You might have to go without little luxuries like your gym membership or cable TV or even have to cut back on some necessities like reducing your grocery shopping, so that you can afford to keep up with the minimum payment amount for your debts. You could experience a whole lot of stress and worry should the worst happen and you lose your source of income due to illness or lack of work.

What happens if you’re struggling to make even the minimum payment on your debts?

Not making your minimum payment on your debts would mean that you’re effectively breaking your terms and conditions with your lender. Practically speaking, this is a frightening situation to be in but help is available so don’t panic.

The very first thing you should do if you know that you can’t afford to make your minimum payment is to speak to your creditors and explain your situation whether you think you’ll be tight for money just this month or for the foreseeable future. If you are honest and open with your creditors, they may be able to help you by reducing the payments for a while or freezing the interest. Even a low token payment may be acceptable to them providing you communicate with your creditors.

It’s easy to think of creditors as big scary baddies, but there are actually humans on the end of those phones. 🙂 Yes, some creditors are scarier than others (especially debt collectors) but in most cases, they should be respectful to you and try to understand your situation and work with you to help you.

In the UK, there are debt charities such as StepChange and National Debtline which can offer advice and support on debt problems. They can also liaise with your creditors for you to come to an agreement as to how you’ll pay back your debt if you’re struggling to keep your head above water. These two charities don’t charge fees either which helps if you’re in a tight spot with money.

How to avoid not being able to make your minimum payments

1. Always pay more than the minimum payment

If you pay more than the minimum payment, you’ll get your debt paid off much quicker than if you don’t. And you’ll pay a lot less interest too. There’s a reason creditors put “By only making the minimum payment, it will take you longer to pay back your debt”, at the end of credit card statements – it’s true!

2. Clear your debt as soon as possible

If you can clear your debt completely, you’ll have no need to worry about minimum payments whatsoever. You could use your credit card to your advantage at this point, by using it to buy your regular purchases and then paying the balance off in full each month. This could earn you rewards depending on your credit card provider and your credit rating will do a little dance with happiness.

3. Beware of the ‘pay it off later’ mindset

When you’re only making the minimum payment on your debt, you might well be thinking that there will always be another day to pay it off later. Putting that debt to the back of your mind leaves room for the temptation to accumulate more debt because you’ve mentally distanced yourself from the consequences of having debt in the first place. It’s a vicious circle and when the time comes when you really do need to pay off that debt, you’ll potentially have a lot more debt to worry about than you did before.

4. Reduce your expenses

Even if you think you’ve already squeezed your budget enough, reviewing and monitoring your budget regularly will help you to see where you can save more money, especially as needs change all the time. If there’s anything that you don’t absolutely need, then cut back on it, even if it’s just a temporary measure whilst money is tight. Shop around for the best deals on your utilities and insurance products and plan your meals in advance to try to reduce your food shopping bill.

5. Earn extra income

Think about whether you could get a second job for a while or earn extra money doing one off jobs outside of your day job.You might be able to land yourself a side gig making the most of your skills or even your hobby. You could sell stuff on eBay or Craigslist to try to generate a little extra money from time to time.

Put yourself out there and let your friends and family know that you’re on the lookout for some extra work and keep your eye on any second job opportunities that come up on sites such as People Per Hour, TaskRabbit or Gumtree.

Personal circumstances change all the time, so being in a position where your debt and minimum payment is a major factor in your monthly expenses is never a great situation to be in. You only have to look at our debt story to see why!

Have you ever been in a situation where you can’t make the minimum payment on your debt?