No matter how hardworking you are, sometimes things can go wrong. This makes it impossible to repay loans or even clear your bills on time. If you are not capable of paying your loans at the right time, it will definitely cause you a lot of damage, and you must take quick actions to minimize them. A clean-up after failure to pay loan instalments can be an uphill and take years to clear the bad history.
The best way to deal with late repayments is to look for a solution. You need to know several strategies to ensure you are the top of things at all times. It is easier said than done but never allows late loan payment to become your consistent habit.
So, What Happens When You Do Not Pay?
If you do not pay your loans, you will definitely be listed by credit bureaus. The worst thing that can ever happen to your financial life is the failure to repay your loans. It becomes default and results in increased loan due to accumulated interest and penalties. What’s more, your credit score falls and will take you years to rebuild it. However, all is not lost, if it has already happened, you can work on it and recover within several years. The journey to recovery is not easy, and that’s why you need to repay your loan on time and avoid getting into this situation.
There are several loans that people get caught up in and end up in huge debts. They include:
Federal Student Loans
Most people borrow government loans to pay for higher education. These loan programs give you several options when faced with a financial crisis. Here are some of the things you can do:
- Deferment- This is one of the best options you have when you cannot repay a federal student loan. It helps you get a break and works to get back on track, especially during unemployment periods. Instead of falling back with payments due to financial hard times.
- Repayment based on income- a repayment based on your income ensures you pay what you can afford based on how much you are making every month. This keeps the payments affordable, especially when you making little and eases the burden of making timely loan repayments.
A payday loan is unique and offers you a cash solution. However, it is costly, and the interests can quickly accumulate and send you into debt. Eventually, you may not be able to clear it. If you have several payday loans, consolidate them into one. Make sure the lender who gives you money to clear these expensive loans offers you money at a lower interest rate. Seek legal advice if you are not sure about to consolidate your payday loans, it will ensure you pay your debts on time.
When you skip credit card payments, it means you have a financial problem. Try to make the least payment though making more is better. You will notice that if you are not capable of paying credit card debt, your bank will increase the interest rate along with penalty costs.
What to Do When You Realize You Cannot Repay Your Loans
While it’s everyone’s wish to repay loans promptly, it still happens. If you find yourself in this scenario, you should take action before your payments are officially late and declared as a default. Here are some options that you should explore.
- Pay late if you cannot pay on time instead of failing to do it at all. You should make your payments at least within a month from the due date. Mostly, lenders do not report late payments to credit bureaus, and therefore, it doesn’t affect your rating.
- Consolidate debts instead of repaying several loans every month. Payday loans and credit card loans are some of the loans that you should consider consolidating. Get an affordable personal loan with affordable interest rate and low monthly instalment. It might cost you a little more to repay a personal loan over an extended period. Still, it makes life easy while ensuring your credit score is not hurt.
- Find a secured loan to consolidate your loans. However, you risk losing your assets if you fail to make the payments on the loan. It is risky unless you have an excellent plan on how you are going to do it. Using your home is the quickest way to get money, though it can quickly put you and your family into trouble.
- If you can foresee trouble and not sure how to make future loan repayments, talk to your lenders. They are likely to change the due date or allow you a short break as you organize yourself financially. With some licensed moneylender online, you can even negotiate for a reasonable settlement. This is only possible if you can convince the lender and maybe also produce some evidence that you cannot make payments.
- Always know the loans to give priority. If you have several loans, know which ones need to be paid first. The most important are secured loans; they are like payments on your car or home. But even unsecured loans are equally important; they lead to credit damage though that doesn’t disrupt your life instantly like losing a car or a home.
Find Some Help
Now that you know you have a problem with loan repayments, look for help. Some of the steps to take include:
- Go for credit counselling to help you understand how bad your situation is and find a solution. Consult a reputable counsellor and especially those who free services without trying to sell anything to you.
- Legal advice also comes in handy. A bankruptcy attorney can help you solve your financial problems if you have exhausted all alternatives.
- Get local public assistance. This helps you manage your current situation and stay at the top of your game. The programs offer relief to people who cannot pay their bills on time.
Work hard and lower your costs to pay off loans. You can also sell some of the items you need. Have long term solutions and change your spending habits completely. This helps you lead a debt-free life and not worry about not being capable of paying loans at the right time.