Sometimes life can surprise you that you can’t pay your loans on time so it’s always an advantage to be aware of the actions that you can take when that happens. When it comes to loans, you have to move faster because the more you take a longer time to resolve the issues, the more the damage it can do to your finances. Not paying your loan on time can be really stressful but if you immediately do a solution for it, lesser is the stress you are going to get. Here are some of the things you need to be aware of and the things you can do if you can’t pay your loan.
What Can Happen If I Don’t Pay?
Well, the first thing that can help you if you are getting a loan is to know first possible scenarios that can happen if you don’t pay. If you stop paying, you default on that loan. What are the consequences? You’ll end up having more payment because of having penalties, fees, and the interest charges build up on your account. Also, the bad thing that can happen is that you are going to have a poor credit rating which will only lessen the chance of you borrowing from other future lenders and types of loans. Although you can rebuild your credit and borrow again, it’s going to take several years.
You do not need to panic, worrying if you’ll end up in jail because of debt. Debtor’s prisons were outlawed in the U.S. long ago. But prepare your legal documents and requirements in case they asked you to appear in court. These are the things that can happen, it’s going to stress you a lot but don’t lose hope. You will get through this and avoid worst-case-scenario.
What If I Notice I Can’t Pay?
When you are getting a loan, you always have to put in mind that you always have time before your next payment is due. So maximize that allowance in time for you take action before you’re officially late on any payments.
Here are some of the few things you can still do to alleviate the problem:
Pay even if it’s late. If you can pay your loan on time, then congrats! But if you can’t do that, then a little late is better than extremely late. Within the 30 days period of the due date, try to pay your loan as you possibly can. Late payments are not reported to credit bureaus in most cases, so do not worry whether your credit will be damaged or not.
Try a different loan
If you realize the current loan is not working good for you, you might be better off with a different loan. Try to avoid toxic loans. A personal loan might be your other best option which has lower interest costs and a lower required payment. A new loan is actually great since it gives you more time to repay. For example is that a personal loan may give you three to five years to repay. But the only downside of taking longer to pay is that the interest also increases but there are some cases that don’t. Aside from personal loans, you can try applying for unsecured loans with banks and join a credit union that works in your community. A payday loan can be a faster way to help you but just make sure to pay on time so you can easily come out ahead. These kinds of loans will minimize damage to your rating.
Try secured loans
The only thing that you are risking here is that when you are consolidating with a secured loan is your assets as collateral. For instance, if you decide to use your house as collateral, just make sure that you can really pay the loan since your house is on the line, you might lose it which will make things worst.
Negotiate with lenders
Talk with your lender as early as possible if you foresee that you will be having difficulty in paying. They can give you options and help you, whether they can change your due date or let you skip payments for several months. Explain and be honest with them why you can’t make the payment and see if they accept. Some may understand, some don’t. But at least you tried or else your credit will suffer.
Prioritize which is first
This is a difficult task since you need to identify which loan you should stop paying for the meantime and which ones to keep current on. Decide well because you don’t want to end up sacrificing your home or your vehicle in return for payment.
All of the things mentioned above are just short-term solutions. After this, you may want to have a long-term plan to stay on top of the bills. Start saving up for emergency savings so you won’t need to borrow in case something financially happens in the future.