It’s nothing strange if you can’t keep up with your monthly debt payments, but where most people get it wrong is when they fail to take appropriate measures if they are unable to meet their debts requirements. You should take appropriate actions as soon as you can rather than sit back and hope. Making a quick move will help you lessen the damages on your financial record. Perhaps, cleaning up may be less stressful when you avert certain things from escalating.
Even the most careful and diligent financial consumers intermittently face unplanned financial issues, which can make debt repayment difficult. Financial hardships can be a result of disability, underemployment, unemployment, injury, or illness. However, there are multiple ways and measures of handling the issue of financial difficulty. Sometimes, these measures might go against every logical reasoning, but trust me, it’s always worth it in the end. Take for example, if you can’t afford to meet up with your car loan, it might be possible to selloff the vehicle and switch to a less expensive car – or possibly do without a car for the time being. Or maybe you’re finding it hard getting your business council tax debt written off, it might be best reaching out to the agencies involved before the matter gets out of hands.
By and large, it is not enough for you to sit back and do nothing whenever you’re unable to meet your debt requirements. Instead, you may need to talk with the creditor before deciding to skip payment. Lenders tend to be a little more flexible with debtors who reach out to them first. As a borrower, you tend to lose options when you default first.
Ignoring a problem will not make it vanish. It will only get worse. The consequences of defaulting on loans are very serious and most often increase the cost of the debt repayment.
Seek assistance from a financial professional, such as a financial planner or accountant, or seek help from a family member. A non-profit counselor may also be helpful in situations like this.
Declaring bankruptcy may not even be an effective solution for loans, such as student loans. Using bankruptcy to discharge a loan involves demonstrating undue hardship in adversarial legal proceedings, a very harsh standard.
Solutions for short-term financial difficulty
If a debtor has a short-term financial issue due to temporary job furlough, job loss or medical maternity leave, they may need a temporary suspension of the responsibility to repay debt.
Forbearances and deferments are included. Forbearances and deferments are not good solutions for long-term financial hardships, because interest will not be paused during that period and may worsen everything at the end; why? The interest rates will be added to the original debt amount hence digging the debtor into a deeper hole than they were.
Borrowers should not stop making loan payments until they receive written confirmation that the collection agency or creditor has approved their deferment or forbearance request.
Solutions for Long-Term Financial Difficulty
If a borrower has financial hardship that seem to be long-term, with little/no hope of prospective income, an alternate debt repayment plan may be the solution to apply in this case.
Options may include graduated repayment, pay-as-you-earn repayment, extended repayment, revised pay-as-you-earn repayment, and income-based repayment. This si dependent on the type of loan.
These repayment plans listed above helps reduce the monthly payment made by increasing the length of the repayment period for the debtor.
Take for example; increasing the term of a loan from 10 months to 20 months lessens the monthly repayment amount by a third. But quite unfortunately, it comes with a prize, because it fires up the total interest paid throughout the loan.
Refinancing a loan that comes with high interest may offer some financial relief. But this is dependent on the credit ratings of the borrower and the cosigner.
Worst-case-scenario: If you don’t pay at all
It might be helpful to talk about the worst that may happen – when you aren’t able to pay anything. If you stop repaying a loan, you eventually become a loan defaulter. The result of this is not favorable as you end up owing more money as fees, penalties, and interest charges build up on your account.
To add to it, your credit rating will drop. It may take several years to build up your credit rating again – sometimes just a few years.
Don’t feel hopeless! Even if you find yourself in this scenario, you can always reach out to IVA company to help you deal with your debt negotiation before your account goes into default.
Dealing with Financial Hassle
Emotional toll can exact on debtors when they face financial hardships, especially when the borrower is besieged with constant calls and texts from creditors and debt collectors.
It is vital to maintain positivity all through. Money problem are not supposed to magically transform a good person into a bad person. Consider visiting any organization that provides free or affordable counseling for people facing financial hardships.
Borrowers should see the god in everything. Focusing on things that can help them move in a positive direction. Taking little steps toward a goal can help a borrower to avoid being dazed by the debt they owe.