In a perfect world, you’d take out a loan and pay it back without any issues. The reality is that life often brings surprises, and you may have trouble with your loan payments. If this does happen, don’t worry. It’s quite common, and there are strategies you can implement to minimize the financial damage and stress. Keep reading to find out what they are.
Contact your lender
As soon as you realize you won’t be able to afford your loan payments, let your lender know. Depending on the lender, they may allow you to pay a portion or offer another viable solution. While every lender is different, many of them will work with you in times of financial hardship, especially if you’ve been a responsible borrower in the past.
Ask about Deferment
Deferment is when a lender allows you to take a temporary break from making payments. Speak to your lender and explain the situation. If you’ve lost your job, your hours have been cut, or you’ve dealt with an emergency, they may grant deferment. Just remember that interest will still accrue.
Make a late Payment
Ideally, you’d make all your loan payments on time. But if life happens and you cannot make a payment by your due date, do your best to pay within 30 days. Since payments made within 30 days of the due date won’t be reported to the credit bureaus, you won’t have to worry about credit damage.
Consider Credit Counseling
If your personal loan has already reached the delinquent stage, consulting a nonprofit credit counseling agency may be worth your time. By doing so, you’ll have access to a credit counselor who may go over your finances, identify the leading cause of your problem, and help you come up with a game plan to get out of debt.
Refinance to a More Affordable Loan
Not only can you save money if you refinance to a personal loan with a lower interest rate and/or lower payments, but you may also receive some extra time to make your payments. If you do decide to refinance, shop around and explore your options so you can find the best refinance offer for your unique situation.
Prioritize your Payments
Not all loans are created equal. If you’re short on cash, it makes sense to continue to make payments on your mortgage and auto loan. Otherwise, your home or car may go into foreclosure or repossession. If you have personal loans and credit cards, you might want to focus on the ones with the highest interest rates first.
The Bottom Line
If you’re struggling to make your loan payments, it’s not the end of the world. You can overcome this hurdle by taking advantage of a few of these strategies and getting your finances back on track.
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