Are you in the middle of a loan default? Well, repaying your personal loan and keeping up with the monthly installments isn’t as easy as it seems. There can possibilities where you miss out on payments. But while this might seem like a major issue, it surely isn’t the end! Yes, defaulting on outstanding payments is something that you should always avoid, but if you unfortunately find yourself in such situations, you can always try one of the following ways to get things back on track. Here’s what you need to know.
Restructure Your Debt
If you’re completely strapped for cash, try to discuss the options of rescheduling your debt with your bank/lender. Since most banks have this option, they’ll allow you to reschedule your debts after carefully evaluating your financial situation.
Do note, that while rescheduling your debt will cut down on monthly instalments, it will result in higher interest payments in the long run. That said, it is certainly a good way to get immediate relief in your present situation.
Eventually, when your financial issues are sorted, you can switch to your old instalment or even prepay the private personal loan, after discussing the available options with your bank. Although this does involve a small fee, it is surely better than several years’ worth of interest payments.
Opt for One-Time Settlement
If you discuss the option of paying back and inform your bank about your current financial issues, some of them might be willing to offer an option of one-time settlements. However, these settlements are only done on special cases.
One-Time settlement is a viable way to pay off your loan if you have some quick cash at hand. In most cases, this settlement amount will be lower than the initial amount that you had to pay. Yes, banks are likely to waive off some fees and added charges for these cases.
However, if your financial situation is constantly deteriorating, it is better to file for bankruptcy. This will immediately free you from the commitments of loan.
Convert Your Unsecured Loan to a Secured One
Most banks have stringent policies while dealing with unsecured loans. So, if you’re on the verge of defaulting, convert your unsecured loan to a secured loan by pledging some asset/property as collateral. This asset can be anything from your house, car, or property. Pledging an asset reduces the interest rate, thereby cutting down on your instalment burden. However, it does involve a degree of risk because your collateral is seized when you fail to repay your loan.
Consolidate Your Debts
If you’re struggling to pay off multiple high-interest loans, try consolidating them with a personal loan. With this process, you will only have to make one single payment against your loans. And since the interest rates on personal loans are lower than most other forms of credit, your monthly instalments will be lower.
So, now that you know about the different ways to deal with a loan default, weigh out your options and choose the one that best works with your situation!