Housing is usually the largest part of any household budget. In some areas, at least 50% of your income goes to paying for rent or housing. But what happens when you can’t pay your rent on time or you simply don’t have money for rent? A job loss or economic downturn could mean your place to live is in jeopardy. It’s important not to panic. The following is an updated breakdown of the options available if you can’t pay rent.
I Can’t Pay My Rent. What Can I Do?
If you find yourself in this situation, it might seem like it’s the end of the world and you see no end in sight. Believe it or not, you do have options if you can’t pay your rent. We recommend the following:
Check Your Lease
Check your lease to see what penalties exist for not paying your rent on time or at all. Your rental agreement should outline eviction provisions.
If you worked with a private landlord to find your home, they gave this to you when you moved in. If you’re in a bigger complex of rental units, your leasing company has these contracts on file. You can ask them for a copy. There may be space in your rental agreement on how you can negotiate.
Also check to see how soon after failing to pay rent eviction procedures will begin. If you know you’ll be completely unable to make rent, it’s important to understand what might happen.
Talk to Your Landlord
To begin, have an honest conversation with your landlord. During the recent coronavirus pandemic, landlords are also in a tough spot. They need to fill units as much as you need a place to live. Talk to your landlord about how to postpone payments as you get back to work. Explain your circumstances.
Are you expecting to go back to work soon? Could you extend your lease for a few months at the end of your rental agreement? You could make extra payments and give them time to find new tenants.
If you don’t think you can pay next month’s rent, ask your landlord what your options are. They may offer payment plans or lease extensions. This may work at larger rental companies too.
Can you reduce your total monthly rent by a small amount to make it easier to pay in full? Maybe your paycheck schedule is out of line with when your rent is due. See if you can change your rental payment date. You can also ask about suspending this month’s rent to help you get back on your feet.
What Happens if You Don’t Pay Your Rent?
Not paying your rent without a plan is risky. There are a few possible outcomes of not paying rent.
Not paying your rent on time affects your credit report. In some cases, it can affect your credit score as well. Your rental history is separate from your primary credit score. Specialty credit reports keep track of how well you pay your rent. If you rent from a private landlord, this might not matter as much. But if you rent from a big housing group, they’re likely to report it.
Groups like LexisNexis and CoreLogic monitor your rental history as a tenant. If you fail to pay your rent, your landlord can report it to these bureaus. This mark on your credit report will follow you for years and affect many areas of your financial life, including if you ever try to buy real estate.
The next, more serious possibility is eviction if you can’t pay your rent. Eviction laws vary in each state. In some states, eviction can happen within just a few days of failing to pay your rent. In others, landlords must take you to court and make their case. Historically, housing court judges tend to side with landlords in eviction cases. So the odds aren’t great if you make it all the way to court.
Eviction shouldn’t come as a surprise though. Talk to your landlord before missing a payment and understand their plan if you’re unable to pay. Don’t be surprised by a notice on your door!
Harder to Rent Later
Failure to pay rent means it’ll be much harder to find a place to rent in the future. Landlords often start by checking your credit history before renting to you. If your credit report mentions prior evictions or failing to pay rent, you may struggle to move in. And if they call your previous landlord and find out about your delinquent rental history, you’re going to have a hard time finding a new home.
Where to Find Help to Pay Your Rent
Charities to Help You Pay Rent
Most cities in the US have charities that help with things like paying rent or providing food. These charities are indexed on 211.org. You can search your local area for rental assistance programs and charities. Dial 211 from your phone or visit the website to find a rental assistance charity near you.
There is also an organization called Catholic Charities USA that provides localized rental assistance.
Qualify for Government Help?
During times of crisis, like COVID-19, local and state governments may offer rental forbearance or assistance programs. Millions of people are affected by these events and some local governments step in to help their citizens. There is no national database of these programs, so you’ll have to Google information for your area. Your local housing authority can also help you find legal services if you believe you’re being evicted.
The Steps to Take if You Can’t Pay Your Rent
Step 1: Talk to Your Landlord
If you know you’re not going to be able to come up with this month’s rent money, try contacting your landlord. While a phone call is easy, it can’t be the only thing you do. Send a certified letter via USPS to your landlord explaining your situation. A certified letter dates your attempt to get help with your lease agreement. If you’re taken to eviction court, you can use this letter to aid your case.
Step 2: Review Your Lease or Rental Agreement
Your lease will contain information about what will happen if you fail to pay rent. It will also outline eviction notices and processes. Understand the dates and process of eviction if you don’t pay your rent this month. Look to find ways you can negotiate with your landlord about adjusting your rent payment dates.
Step 3: Check Your State’s Eviction Moratorium
During times of crisis, some cities will enact something called an eviction moratorium. During these times, landlords cannot evict you for failing to pay rent. These moratoriums are often short lived, but it may buy you some time to figure out your next move. An eviction moratorium does not mean you don’t have to pay rent though. If you stop paying rent, when the moratorium is lifted you’ll be subject to eviction again.
Step 4: Seek Rent Payment Assistance
As mentioned, there may be local charities you can talk to about getting help with financial assistance to pay your rent. Check with 211.org for rental assistance in your area. Alternative places to live can also be found on the Department of Housing website if you know you’re facing eviction.
Step 5: Prioritize Your Bills
Finally, focus on your bills and find what’s the most important. Not all bills are equal. This means that your electric bill may be more lenient than your landlord. Your car payment may be flexible in making smaller payments. Get creative with your bill paying so you can continue paying rent.
Finding Your Most Important Bills
As you prioritize your bills, consider thinking about your bills in terms of a hierarchy. This helps you understand which bills are vital and need to get paid first. Others can wait to be paid if you’re in a pinch.
Obviously, paying all your bills is your priority. However, if you can’t pay all your bills, prioritizing certain items can improve your financial health.
To learn about prioritizing your bills, we’ll take a page out of our old Psychology 101 textbooks. We’ll use Abraham Maslow’s famous theory on an individual’s hierarchy of needs to figure out which bills to pay.
Abraham Maslow argued that every human being has needs that need to be addressed in a specific order. The needs are prioritized from the most basic required for survival all the way up to comfort and wants. Every need in each category must be met before moving to the next. We’ll use this framework and apply the same concepts to your bills to decide which ones need to be paid first.
How to Prioritize Your Bills
If you’re behind on rent, it’s time to prioritize your bills. This means figuring out which bills are the most important and which ones you can push aside. Even if you try to make extra money before the first of the month, it can be stressful to figure out what to pay first. Housing and keeping the lights are at the top of the list. So is keeping up with your car payments. But your credit card or gym membership may not be as important.
Not all bills are due at the same time or carry the same penalties for cutting back on the amount you pay.
Your credit cards are important. But they’re not mission-critical to keeping a roof over your head. Start by calling your credit card company and ask if they can extend your credit limit on your cards. This way, if you need to make only minimum payments for the time being you can continue using your card.
Your credit card shouldn’t be a lifeline for paying all of your bills. But if you need to defer payments, adjust your interest rate, or extend your credit limit you can. You shouldn’t avoid paying altogether though! Find a way to make the minimum monthly balance payments. This will keep your credit intact. Your credit card may also agree to waive late fees depending on the circumstances.
This should be a no-brainer, but your memberships should be the first things to go. Gym memberships, wholesale clubs, and more should be cancelled if you pay monthly. Or if there are cancellation penalties, make some phone calls to push back your payments.
You need your car to get to work. Losing it could be detrimental to your financial health. If you can’t get to work, you can’t pay your bills. But your car payment is tricky. For banks to repossess your car, things have to get dire. In most cases, banks don’t want to repossess your vehicle. It loses value quickly and taking it from you means they’ll lose money.
If you’re behind on rent, your car loan provider may be able to work with you to find new payment terms. You can negotiate a lower monthly rate, new interest rate, or even defer payments for a few months while you take care of your housing.
The important thing is to call and ask what can be done.
Your groceries can also be a place you look to cut money from to keep a roof over your head. Food banks and charities can provide meal assistance to you and your family in times of need. If you need to get staples from food banks, you can save money for a few months.
Cell Phone and Cable
Also at the bottom of the list of priorities are your cell phone and cable subscription. Again, call your providers and see if you can negotiate a lower rate for the coming months or switch to a lower plan.
Ask About Cancellations
Any phone calls you make, ask explicitly when service will be terminated. Know how long you have to catch up on making payments before your service shuts off. Even if it only buys you one or two months, it could be the difference between losing your home or not.
Don’t Avoid Paying Your Rent
Simply not paying your rent can’t be your game plan. The fallout of ignoring the issue of not having enough money to cover your bills can be massive.
While it’s no doubt a scary time, you can’t avoid the problem completely. Take proactive steps to find ways to come up with the money to pay your rent on time. Have open and honest conversations with your landlord about your situation. Ask what can be done about next month’s rent. Long-term, you’ll need to consider alternative living situations like finding a cheaper place to live.
Did we miss anything? Let us know in the comments, we’d love to hear from you.