Tips for getting back a third when you can’t make a loan payment. Sometimes life brings surprises. If you find that you cannot make payments on one or more of your loans, it is best to take action sooner rather than later. Running fast helps you minimize the damage to your finances and the stress of cleaning up something that can continue to make it worse.
The solution may be simple in some cases. For example, if you cannot afford to pay for a car, it is possible to sell the car and switch to a cheaper but safe car – or even without a car for a while.
If you don’t pay
This could help in the first case of the worst-case scenario. If you simply stop paying the loan, you will end up paying off the loan. The result is that you will owe more money as penalties, fees, and interest will increase. Your credit scores will fall. It can take a few years to recover, but you can rebuild your credit and borrow again – sometimes within just a few years.
Debtors’ prisons have long been banned in the US, so you don’t have to worry about the threats of debt collectors sending police tomorrow. However, it is necessary to pay attention to legal documents and requirements in order to at least appear in court.
That’s the worst that can happen. It’s not fun – it’s frustrating and stressful – but it’s something you can go through and avoid that situation completely.
Once you understand, you can’t pay
Hope you have some time before you have to pay for the next one. If this is the case, you can take action before being late for any payment. At this point, you still have several options.
- Pay Later: It’s best to make credit payments on time, but if you can’t make it, a little late is better than really late. Please try to make the payment within 30 days of the due date. In many cases, these delays are not reported to the credit bureaus, so your credit will not be damaged. This leaves you with the ability to consolidate or refinance your debt.
- Consolidation or refinancing: You may be better off with a different loan. Especially with toxic loans such as credit cards and paid loans, consolidating with personal loan results in lower interest rates and less required payments. Plus you have more time to repay. For example, you might get a personal loan that you repay over three to five years. Allowing longer repayment time may cost you more – but you may not. Again, if you are getting out of payday loans, you can easily go ahead. You must apply before missing payments are started in order to be approved for consolidation credit. Lenders are reluctant to grant a loan to someone who is already standing. Where would you borrow? Start applying for unsecured loans with banks and credit unions working in your community and online lenders. Apply for these loans at the same time to minimize the damage to your credit card and go with the best deal.
- Secured Loans: Consolidating with a secured loan is also an option if you want to pledge funds as collateral. However, you run the risk of losing those assets if you are unable to make payments for your new loan. If you put your house on the line, you can lose it in foreclosure, which makes things difficult for you and your family. Owning your vehicle is never convenient and it would be harder to work with and continue to earn revenue.
- Communicate with Lenders: If you anticipate payment problems, talk to your lender. They may have options to help you, whether it changes your billing date or allows you to skip payments for a few months. You may be able to negotiate a deal with your lender. Explain that you cannot make payments, offer less than your debt, and see if they accept. This probably won’t work unless you can convince your lender that you can’t pay, but it’s an option. Keep in mind that your credit will drop if you agree, but you can pay from behind.
- Prioritize your payments: You may need to make difficult decisions about which loans to stop paying and which ones to keep. Conventional wisdom says keep paying on your home and car loans and stop paying unsecured loans if you have to, such as personal loans and credit cards. The rationale is that you really do not want to be ejected or your vehicle returned. Damage to your credit is also undesirable, but it does not currently interfere with your life in the same way. Make a list of your payments and make a conscious choice about each, keeping safety and health in mind as you choose.
Federal Student Loans
If you are lending to higher education with the help of government loan programs, you have several additional options. Loans backed by the federal government have certain benefits not found elsewhere.
- Postponement: If you qualify for a postponement, you may suspend payments temporarily. This gives you time to get back on your feet. For some borrowers, this is an option during periods of unemployment or other financial difficulties.
- Revenue-based repayment: If you do not qualify for a deferral, you may be able to at least reduce your monthly payments. Income repayment programs can result in payments that should be more affordable. If your income is extremely low, you will end up with extremely low reconciliation payments.
Payday loans are also unique, mainly because of the extremely high costs involved. These loans can easily send you into a debt spiral, and eventually, there will be times when you cannot make payments.
Consolidating payday loans is one of your best options unless you can pay them off. Can you sell anything to get your money’s worth? Shift your debt toward cheaper lenders – even credit card balance transfers can save you money and buy time. Just refer to the balance transfer fees and do not use the card for anything other than paying your existing debt.
If you have already written a check to the lender, it may be possible to stop the payment on the check. However, it can lead to legal issues and you will still owe money. Speak to a local lawyer or legal adviser familiar with the laws in your country before stopping payment. Even if this is an option, you will have to pay a modest fee to your bank.