If you sometimes find yourself in a situation where you cannot repay a loan when it is due, you are not alone. Most Americans have some debt and the majority also lives paycheck to paycheck. Even those who are careful with money can find themselves struggling financially because of a surprise expense. Fortunately, there are no debtors’ prisons in the U.S and there are some things you can do to solve the problem. Evaluate your situation, learn as much as possible about the kind of loans you have, and choose an option that works best for your circumstances. The key is to act immediately. When it comes to debt, the longer you put off the problem, the worse it will get.
1. Paying Late Is Sometimes the Simplest Solution
It is always best to pay loans on time because it helps improve your credit score. If you can’t, it is better to pay somewhat late than not all. Every loan type has a late penalty, but a single payment that is less than 30 days late often has little effect on credit. Nearly all lenders charge a late fee and some can increase interest rates for late payments, so you should weigh the costs and decide if they are worth it. If you have used your vehicle to secure a loan, it is important to read the title loan terms to ensure you will not lose the car if you pay late.
2. Discuss the Problem With Your Lender
Lenders are happy to help you when you are having trouble with loan repayments. They would rather help clients repay loans than see them ruin their credit or resort to drastic measures like bankruptcy. Many loan customers fall hopelessly behind because they do not understand their options. A CNBC article reported that by June 2017 household debt in the U.S. had reached $12.84 trillion and millions of Americans had no repayment strategy. With that in mind, banks, loan companies, and other institutions now offer a range of solutions. Professionals may help you restructure debts. They might suggest options like transferring balances to credit cards with low introductory interest rates so you can pay down balances and lower monthly payments.
3. Consider a Personal Loan
A personal loan can often solve a temporary cash shortage problem by allowing you to consolidate debt. You can lower your total monthly expenses and end up with a single payment that replaces several. It is a popular and effective solution. A recent Forbes article discussing personal finance reported that 1 in 10 adults expect to take out a personal loan within a year. If you have the credit, a short term (3-5 year) loan may allow you to quickly pay off expensive debt like high-interest credit cards.
4. Speak to a Credit Counseling Service
When you do not have the credit to qualify for new loans or credit cards, a reputable credit counselling agency offers solutions. You can check with the National Foundation for Credit Counseling (NFCC) and find a trustworthy business. It is important that you discuss their philosophy and fees before agreeing to work with them. A trained counsellor will help you understand your situation and options. Their suggestions often include a debt management plan.
Anyone can be short of cash and unable to pay one or more loans. If you find yourself in this situation, there are several things you can try. The simplest might be to pay late. It is also a good idea to discuss your dilemma with your lender, who may offer solutions. You might consider a personal loan that allows you to consolidate debt. If there are no other options, a reputable credit counselling service can help.