5 Things to Do When You Can’t Pay Your Loans
Sometimes, the worst just happens – you are unable to pay your loans for some reason. What now? If you cannot make the repayment, it is best to take fast action today to minimize the damage on your credit. It is not always easy but there are sound things that you can do to stay on top of everything. Here are five of the best strategies:
- Pay late. Ideally, you are able to make your loan payments on time, but if that is impossible, paying slightly later is better than really late. If you get your payment within 30 days of the due date, some lenders do not even report this as a late payment to the credit bureaus.
- Consider debt consolidation or refinancing. Toxic loans like credit cards and payday loans are better consolidated with a new personal loan. There is a good chance that you can get lower interest rates, plus a lower required payment. In addition, a new loan can give you more time to repay. Analyze your situation well and apply for a new loan before you start missing payments and mess your chances of qualifying for a new one.
Consolidate with a secured loan. You can improve your chances of getting approved if you consolidate by pledging assets as collateral. But be mindful: you risk losing your assets if you fail to make payments on the new loan. If your house is foreclosed, you can create a big problem for you and your family. Having your vehicle repossessed may impact your ability to get to work and earn income.
- Speak with your lenders. Do not hide from your problems. The moment you foresee trouble making payments, communicate with your lenders. Ask about what options are available to improve your situation. Maybe they can move your due date or allow you to skip payments for a few months. Negotiating a settlement is another option but this may affect your credit negatively.
- Assess your payments and prioritize. Which payments should you keep current on and which loans can go behind? It is a difficult decision but a must to manage your financial situation. Conventional wisdom says keep making payments on your home and auto loans and put payments for credit cards and personal loans on the back seat. It will damage your credit but the disruptions on your life will not be as massive as when you are evicted from your home or you lose your car. Determine your priorities, make conscious choices, and take action to improve your financial life.