Unemployed or underemployed and can’t make payments on your loans? You are not alone.

The American Banking Association recently released a report indicating that a lot of Americans are not paying their bills.

…delinquencies on consumer debt rose to a record 3.23% in the first quarter of 2009, up slightly from the previous quarter.

This number does not include credit card debt.

Similarly, the balances on those late credit card accounts rose to 6.6% of all outstanding bank card debt, marking another record high.

The reports shouldn’t be surprising. If you have no money or are making less than you did, paying bills becomes difficult if not impossible.

Don’t dodge bill collectors or anyone you owe. Be forthright and explain your situation or try to make some small payment if you can.

Prioritize your bills. Pay the essentials such as mortgage or rent, transportation to get to work and utilities.

You aren’t the only one. Ask for a restructuring of your mortgage, if you can. If it is true hardship you can ask to reduce the interest rate on your loan with no additional fees. Some income requirements may be imposed but remember companies also want their money too. Late payments and delinquencies also can mar your credit report but making some effort will be better than doing nothing.

This video tells the story of a woman who did the right thing by paying her mortgage but her house was being sold because the title was listed as someone else’s. Going through the proper channels she had no recourse so she and her husband had to hire a lawyer to straighten things out.

Keeping a paper trail is important especially in the digital file age. Check your records regularly to see if your payment is going to your account. Also have a recent paper copy of your payments in case something goes wrong.

Houses may also be sold for taxes, or pose problems when refinancing if the taxes are not paid. A Chicago area company was taking payments for property taxes and insurance but hadn’t been using the money to pay their customers taxes or insurance.

If people have a record of their payments to the company then they might have some recourse especially if they have cancelled checks. In Illinois, the attorney general’s office is looking into customer complaints by many people who say the company took their money but did not pay the taxes with the escrow money collected.

For payments that are being held in escrow, it is still important to check and see if your payment is being directed to the right place. Check your tax and insurance records to see if everything is being paid on time. Don’t trust that a company is doing the right thing because of the name. Human error also happens. Be watchful and pay attention to payments.

Luxury. Now the word has become synonymous in some circles with waste. Luxury does not have to be wasteful. Though since more people are spending more time with friends at home, they are also spending more money on their home. Money Magazine listed several household items that you might want. All of the items cost less than five hundred dollars. Depending on where you live, $500 is a good chunk of change – like almost a mortgage payment or monthly utilities. 

The luxury items that are being showcased are ones that I could really do without – a heated towel rack or  a counter wine chiller. The other suggestions such as a hammock for my yard would be too small for my balcony, ditto for an orchard.

Household improvements that could be made for low or no cost could be selling books or dvds (or other media) that you no longer read or watch. Either way you will have more space in you home. 

Don’t scrimp or buy the cheapest gadgets or items that you know you will use. Any item that you like but will not use, start saving for it and revisit the idea of the purchase. You might just want to pass on by it. If you like cappuccino but drink it only occasionally, then walk on by that stove top cappuccino maker and just treat yourself to one when the mood arises. You will save space in your home and keep some extra cash.

What we consider necessities and luxuries has changed since the economic downturn, The Pew Research Center has indicated that from those surveyed there have been some changes in what people consider a necessity. Luxury and necessity are relative terms depending on who you are and your situation but thinking about a serious purchase before you make it would be a wise decision in any economy.

Mortgage accelerator programs are not bargains at all. My mortgage company always sends me information about their mortgage accelerator program which would allow me to save money over the lifetime of my loan.  Instead of paying monthly I would pay biweekly which would add an additional payment and a quarter each year for the lifetime of the loan. 

BUT, there is a catch, to sign up I have to pay $49 to enroll and a fee of $9 for each month I participate in the program. Over the course of a year, that’s $157 in fees, plus an increase in the amount of my mortgage. Sounds good to save money over the life of the loan, but a better way to do this is to send in an extra amount – however small and consider that amount your mortgage. 

Each month I send in a little over $50 extra. At the end of a year, without paying an additional $157, I have made about 13.5 payments to my mortgage. The benefit to a self-directed prepayment program is that I do not have to pay the same amount all the time, there are no additional fees and there is still a savings.

Figuring out how much more you want to add to your mortgage’s principal is a personal decision. You might not want to make any additional payment each month or at all but if you have a mortgage that does not penalize for prepayment you could prepay, just by making an additional payment over the course of a year.

 Multiply your mortgage payment by 13, then divide that number by 12. This will give you the new amount that you should pay if you want to pre-pay your mortgage. Round the dollar amount to an even number. Pay attention to the pricing for any fee-based mortgage accelerator programs. Even by just adding the yearly fee to your principal will make a difference in interest savings and the amount of equity that you build.

Is foreclosure in your future? Even if it isn’t mortgage scam artists are preying on people’s sensitivities and asking for money to help resolve financial issues. 

Mortgage companies that are not your own would not call you about anything. That should be the first indicator that this is not a legitimate form of help. Also to have your mortgage reduced, you should not have to pay fees up front. Paying points to have a reduced rate is not the same as having someone ask for hundreds or thousands of dollars to have your mortgage adjusted.

Findaforeclosurecounselor.org helps people who are close to foreclosure get some help for free. This is a resource listed on Neighborworks America.

Just because you go through foreclosure counseling, there is no guarantee that you will avoid foreclosure, but you will not have to go further into debt trying to prevent losing your home.

Interested in refinancing now that the rates are dropping? If you purchased your home before the housing market soared and have a rate that is about 6% or so, you might not make any significant savings by refinancing. When you factor in the amount of time that you will spend paying your mortgage and associated fees, you may not make any significant gains with a lower interest rate. Also, your monthly payment may increase if you decrease the term with the additional fees. To save money over the course of your loan, making an additional payment over the course of a year will allow you to save money in interest.