What to Do If You Can’t Make a Loan Repayment
Sometimes loan repayments and other bills can pop up at the worst times.
If you can’t make a loan repayment, it’s not the end of the world. In fact, lending institutions sometimes get misunderstood, but often they want to help their clients.
Here are some things to consider if you can’t make a loan repayment.
Firstly, what happens if you don’t make a repayment?
Missing a loan repayment means defaulting on the loan. This will likely be recorded on your credit report (also known as a credit file). This could negatively impact your credit score, making borrowing more difficult in the future. However, credit scores can be repaired over time.
Lenders typically contact clients who miss loan repayments. They’ll want the borrower to catch up and complete the missed payment as soon as possible.
What if I can’t make loan repayments for a long time?
If you miss multiple repayments, your credit history will be further negatively affected. The lender could then proceed with legal action, meaning there’s a chance they could repossess your car.
Avoiding this situation is a good idea in anyone’s books.
So, what are the options?
Contact your lender
Some borrowers hesitate to contact their lender when things get tough. There’s no need. Lending institutions fully understand that circumstances change - COVID has taught us all that.
Remember that lending institutions want to provide good customer service. That means understanding their borrowers and helping them find a solution. Sometimes, lenders are able to offer money saving tips or readjust the loan term and repayment amounts or temporarily decrease the amount with a plan to make it up further down the track.
Lenders typically have a hardship team who can talk borrowers through the above.
Make sure to prepare a few details before calling your lender. They may need to know some information about your income or circumstances in order to assist you in the next way possible.
Contact financial support
If you can’t make a loan repayment, contacting debt relief support is a good way to know where you stand. Information is always a good thing to have when you need help.
Often, you’ll need to discuss the hardship you’re regarding finances but again, these people are here to help.
Sell or trade in the car
This might be a viable option for some borrowers. Selling the vehicle and using that money to repay the remaining balance on the loan is something that works for some borrowers who can’t make a loan repayment.
Make sure to discuss this with your lender first and read through your loan agreement to make sure you’re doing the right thing.
Make sure that;
- You can get around without a car
- You are sure you can’t make the loan repayments
- Selling the car won’t affect any family commitments you may have
- Your lender is aware of your plans
Refinance the loan
Refinancing is often an excellent idea for people who can’t make loan repayments or are struggling to make them.
Refinancing works by taking out a new loan to pay off an existing loan. Of course, you’ll need to make sure that the new loan has more benefits and better conditions than your current loan.
Taking out a new loan to pay off an existing loan may sound strange at first, but it can offer extended loan terms (the time you have to repay the loan), which makes scheduled repayments lower in amount per month. This means more freed up income.
Some borrowers may also be eligible for lower interest rates.
If you’re interested in refinancing a loan or finding out more, contact the team at Positive today.
At the end of the day
If you can’t make a loan repayment, you’re not alone. Many borrowers have a change of circumstances and need to readjust things.
The worst thing you can do is not seek help or not reach out to your lender. Always seek professional advice as soon as you need it.
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