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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Winter 2008/2009 – Special Edition: Managing Your Money in Good Times and Bad

When Payments Are a Problem
What to do if you can't afford a loan or credit card

With the economy weakening, more people are finding it difficult to make mortgage, credit card and other payments. If you're having financial difficulties — due to a job loss, a higher mortgage payment because of an interest rate reset or any other reason — it's important to take action, preferably as soon as you think you may not be able to afford your expenses.

"The possibility of not being able to meet monthly financial obligations, especially if it leads to the loss of your home, can be terrifying," advised Susan Boenau, Chief of the FDIC's Consumer Affairs Section. "If you're having difficulty paying your debts, the worst thing you can do is ignore the situation and do nothing."

Regardless of the reasons for your financial difficulties, here are some basic steps to take.

Consider moves that can enable you to make your payments. Look for ways to cut expenses (see Good Ways to Get Started Cutting Back). If possible, pay your bills using funds in your bank and brokerage accounts, and avoid withdrawing or borrowing money from your retirement savings.

Keeping current on loan, credit card and other bill payments also will help minimize damage to your credit score (see Your Credit Score) which is especially important if your financial difficulties are because of a job loss. Why? Because as you apply for new jobs, employers may review your credit report.

Contact your lenders if you anticipate payment problems. "Don't wait until after you can't make your mortgage payment or the minimum payment due on your credit card, because by then, you may have damaged your credit rating and you may have fewer options available for getting help," said Kathleen Nagle, FDIC Associate Director for Consumer Protection. Immediately contact your creditors and attempt to work out a solution.

Be proactive if your payment problems have already begun. Remember, if you can't make your mortgage payments, you risk losing your home to foreclosure. You need to seek help...and do so fast... by discussing your options with your lender or loan servicer (the company that collects payments and performs other work for the lender, including negotiating new payment plans with borrowers who are late or delinquent on their loan payments).

Or, you may first want to seek help from a trained, reputable housing counselor. To find one, start by contacting groups such as NeighborWorks America (www.nw.org) or by calling 1-888-995-HOPE (4673). You also can find a housing counseling agency certified by the U.S. Department of Housing and Urban Development (HUD) by going to www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or calling 1-800-569-4287. (Also see President Announces Aid for Millions of Distressed Mortgage Borrowers.)

Likewise, if you're having problems paying your credit card, student loan or other debt, contact your lender to work out a solution. And if you need help negotiating with a lender or otherwise getting a debt problem under control, consider asking an attorney, accountant or another trusted advisor to refer you to a reliable credit counselor who, at little or no cost, can help you develop a recovery plan. Many communities have free legal-assistance programs that can provide advice and referrals.

Finally, for warnings about scams that target consumers having credit or debt problems, see When the Economy Cools Down, Financial Scams Heat Up and When a Debt Collector Calls.

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Last Updated 5/26/2009