The best strategy if you can't make a payment on a debt is to contact the lender and work out a payment arrangement to see how you can get the debt paid.
If you don't pay the debt it will eventually be sent to a collection agency and if it already has you should work with the collection agency to pay down the debt.
You can most often negotiate a good deal with the debt collector as when the debt collector buys day they buy it very cheap and for less than you owed to the original company.
Notify the creditor as soon as possible to work out a modified payment plan if it has not already been sent to the collection agency.
A good idea if you are unable to pay back debt is to also have a credit insurance policy in the event you die or have a financial hardship, disability etc it can cover the debt at least partially.
But the credit insurance won't pay out right away so if you're already in debt that you can't pay right now it won't help but it will help in the future.
Credit insurance costs around $370.00 a year although it can cost up to $500.00 a year depending on the coverage and the type of loan you're buying the credit insurance for.
Usually credit insurance costs only 0.25 cents on the dollar.
The price of the credit insurance policy is dependent upon a number of factors including the amount of the loan or debt, the type of credit and the type of policy.
Companies will charge premiums by either using a single premium method or a monthly outstanding balance method.
A lender cannot require credit insurance and you cannot be denied credit or a loan if you don't buy the credit insurance as credit insurance is entirely optional.
However the exception to this is that you are usually required to have PMI or private mortgage insurance which lenders require from most people who buy homes with less than a 20 percent down payment on the home purchase.
The cost of credit life insurance is around $370.00 a year for a coverage amount of $50,000.00 although it can cost more if you need more coverage.
The credit life insurance costs can vary depending on how much you borrow and the type of credit or loan you have.
Credit life insurance is often a guaranteed issue policy, so you won't have to go through a health exam to get it.
However, since guaranteed issue policies are a higher-risk type of policy for insurers to provide, they tend to be more expensive than other options if you're in good health.
The person who typically pays for credit insurance is the debtor which would be you or the person buying the credit insurance and it's usually purchased during and through the loan and lender.
The credit life insurance covers and pays the debtor's debt in the event of the debtor's death and credit accident and health or disability insurance pays the loan or debt when the debtor is disabled or ill.
The maximum credit insurance the insured can buy is up to the amount of the loan.
Most credit insurances policy's cannot exceed the amount of your loan that you took out.
You can get credit insurance through the lender by telling them you want to purchase the optional credit insurance.
The most commonly purchased type of credit insurance is credit life or credit accident and health or disability insurance.
The credit life insurance pays the debt in the event of the debtor's death and credit accident and health or disability insurance pays the loan or debt when the debtor is disabled or ill.
The risks that are covered by credit insurance are late payments or extended payment defaults, bad debts that arise from customer insolvency, political risk such as non payment that results from climate or political related events, currency restrictions, interruption of trade or expropriation.
Credit risk refers to the possibility that either one of the parties to a contract will not be able to satisfy its financial obligation under that contract.
The three types of credit insurance are unemployment credit insurance, life credit insurance and disability credit insurance which is available to credit card customers and anyone else that takes out loans, mortgages or other debt they have to repay.
Credit insurance works by paying all or a portion of the outstanding debt in the event of the person named on the credit insurance policy were to die, become unemployed, disabled etc.
The credit insurance company pays the money directly to the creditor or lender to pay off or pay back either in full or a portion of the debt owed.
The credit insurance is optional insurance that is sold with a credit transaction, such as a mortgage or car loan, promising to pay all or a portion of the outstanding credit balance if the insured is unable to make their payments due to a covered event, such as loss of employment, illness, disability, or death.
The most common types of credit insurance include.
Credit life insurance which is insurance coverage that repays some or all of your loan if you die.
Credit disability insurance is a type of credit insurance policy that will pay if you can't work due to an illness or injury.
The following are covered under credit insurance.
Extended payment defaults (late payments).
Bad debts arising from customer insolvency.
Political risk: non-payment resulting from political or climate-related events, currency restrictions, interruption of trade or expropriation.
When you have credit insurance you pay the premium, and if you lose your job, become unable to work due to a disability or die, the insurance protects the lender by making payments on your behalf.
Credit disability insurance is generally written for 60 months, and any payments due after the insurance termination would not be covered.
Credit insurance also may not cover balloon payments that are due at the end of a loan.
Trade credit insurance insures your accounts receivable and protects your business from unpaid invoices caused by customer bankruptcy, default, political risks, or other reasons agreed with your insurer.
Trade credit insurance is also known as debtor insurance, export credit insurance and accounts receivable insurance.
Taking out credit insurance is not for everyone unless you think you may die soon or may get into financial problems.