Life has a lot of turns. There are chances that you may not be able to pay your loan. A situation may happen and just render you unable to pay one of your loans. What can you do in such a case? As already mentioned, failure to pay in time has negative implications. What about the failure to pay the loan completely? The lender may file a lawsuit against you and this is the list you that you should let happen. If you discern you are unable to repay the loan, making swift decisions can help you lessen the harm on your finances. You should aim at preventing the situation from worsening. Let us examine some effects of not paying before addressing what you can do.
Obtaining a loan has become a common trend across the world. There are different loan options you can check and compare them here best money lender in Singapore and can utilize for different purposes. For instance, you can take a business loan to finance the operations of your venture. Still, you can take a personal loan to cover an emergency situation such as a medical condition. If you want to become a homeowner, you can consider taking a mortgage. Nevertheless, it is also important to acknowledge the fact that any loan taken is an obligation that comes at a cost.
A loan has to be repaid along with the interest amount. That is, it is important to use the borrowed money wisely. If not used properly, a loan can significantly damage your financial life in the future. You also want to be cautious with agreed dates upon which monthly payments are supposed to be submitted. A failure to pay in time damage your credit score and this limits the chances of being approved for subsequent loans.
The consequences of not paying
Can an individual take a personal loan with the intention of not paying? This is very unlikely. However, the worst of the worst can happen and limit your abilities. The following are some of the problems associated with the inability to repay a loan:
- More penalties. You will the lender a lot of money in penalties. If you manage to put your feet back on the ground, these penalties and late payment fees will be part of loan due.
- Damage to your credit score. Your details may be forwarded to the credit bureaus and this will damage your credit score. Unfortunately, it often takes years to rebuild it. Usually, delayed payment of a week is not reported. However, if a borrower fails to submit payment a month after the due date, the details are often reported and this will be reflected in the credit history. One late payment can have devastating consequences.
- Defaulting a loan means you are unable to pay the loan in full. The lender may refer you to debt collecting agencies. The debt collectors will ensure you pay the much that you can from the outstanding balance.
- If the debtor collectors fail to handle you, legal action may be taken against you. In most cases, the court of law judge in their favor.
- High-interest rates. Late payment and a defaulted loan will be reflected in your credit history. Other lenders will feel the chances of you making late payments or defaulting are high and thus charge higher interest rates.
Evidently, the failure to pay a loan has devastating impacts. Is there something you can do to lessen the negative impacts? Let us see…
What Can You Do?
Generally, there is always sufficient time between payments. If you realize you will not be able to repay, there, you have a number of options at this stage. It is important to take some actions before it gets late officially. You can do the following:
- Communicate with your creditors. It is very important to talk to your lenders whenever you foresaw the inability to make payments. The lenders may opt to help you either by adjusting your due dates or allow to skip payments for some months. Depending on your lender, you can be able to negotiate payment. Let the lender know that you will not be in a position to make payment. Give what you can afford and see whether it can be accepted.
- Prioritize loan payments. You will have to decide on which loan to settle and which one not to pay. Ideally, you need to prioritize payments of home and vehicle loans and postpone the payment of unsecured loans. The reason behind this is that you wouldn’t want to be evicted from your home or have your auto taken. Even though your credit score will be damaged, the effect on your life cannot be the same as in a scenario where you are evicted or your car was taken away. Take note of all your loans and prioritize them.
- Consolidate your loans. Maybe you will be better placed with a different debt. This usually the cases when you have very demanding loans such as credit card or cash loans. If you consolidate with a personal loan, you will end up having a lower interest rate or even a reduced payment. What is more, a new loan often gives a borrower more repayment time. While this may end up being expensive in terms of interest costs, it can help the situation. Besides, this strategy can help you get out of payday loans without being as expensive as expected. Important to note, you should take this option early before you begin missing payments. You may not be approved if you are already behind.
- Pay slightly late rather than very late. It is important within the stipulated time. But if you cannot afford, try and pay within 30 days after the due date. In most cases, late payments that extend beyond 30 days are the ones reported to credit bureaus. This means if you take this option, you will save your credit history from damage.
- Take a part-time job to supplement your income. Failure to repay a loan has a lot of negative impacts. Do not allow that to happen to you. If you anticipate that you will be overwhelmed by debts, look for a part-time job to help you deal with monthly payments.
- Seek help. There are many trustworthy credit counseling agencies out there that can help you advice on how best to deal with your loans and help you service the debt. A reputable counselor will assess your situation based on your income and the information provided, overall expenses and debt. You will then be assisted to draft a plan that will help you get out of debts.
Conclusion
Try your best not to miss your payments. But if you find yourself in financial distress and thus unable to pay, use the aforementioned tips to salvage your financial condition. Indisputably, your current and future financial status depend on them. Learn to spend less than what you earn and you will have a bright future financially.
