Written by: Guest | Best Company Editorial Team
Last Updated: December 8th, 2020
Everyone knows that life can bring surprises — some good and some not so good. Unexpected financial challenges are hardly uncommon. They can come in the form of job loss, major medical needs, or catastrophic event. When these things happen our budgets can be disrupted, if not completely destroyed, and our ability to keep up with bills and other financial obligations is compromised.
Often the first thing to be cast aside is paying back loans or credit cards.
It's a legitimate, not-so-rare problem: What do you do if your situation has changed since and you can no longer pay back your personal loan?
Worst Case Scenario
If you are in a situation with months and months of missed payments behind you then you may be looking at some serious consequences.
Below are the three most common consquences that you may face for missing your personal loan payments over an extended period of time:
Even if you are months into late payments it is better to try your best and pay anything that you can in an effort to buy more time and flexibility with your personal loan lender.
If you find yourself in this less than ideal situation, skipping personal loan payments, there are solutions to help you get out and stay out of the money lending hole:
Solution #1 Communicate with your lender
If you have fallen into some unfortunate circumstances where you have to choose between buying food (for example) and paying your monthly personal loan payment, your choice is a no-brainer. But don't just forget about the loan. If there is a valid roadblock standing in your way of making your personal loan payments, you don't need to give up hope.
The best way to deal with a scenario such as this is definitely not to ignore the predicament and hope no one finds out but to instead contact your lender as soon as possible and discuss the situation. Getting in touch with your lender when the problem first presents itself is crucial. Waiting too long will result in:
- Accumulated late fees
- Collection efforts
- Hits to your credit
- Beginnings of the default process.
It may come as a surprise, but lenders are actually quite willing to work with you when you have difficulties paying back your loan. Most lenders understand that life can throw unforeseen snares in your way, and they will appreciate your proactive approach to the dilemma. Give your financial institution a call and explain what is going on and that you want to figure out a way to work through the difficulties.
Solution #2 See if you can renegotiate the terms of the loan
A lender is much more likely to be sympathetic to your situation if you make the effort to reach out and ask for help. Though not always possible, many lenders are willing to rework your loan terms to make it more affordable and feasible for you to pay back.
Lenders can look at your finances and other debts and renegotiate your monthly payment. The principal will remain the same, but the lender may help make the payments more affordable. Lenders might even grant you a 30-day deferment on your payment. It's certainly worth asking about.
Solution #3 Sell another possession
If reworking the loan isn't an option and your lender is still demanding on-time payments, you need to find some way to come up with the money to pay your loan. One option is selling a second vehicle.
Ideally, you could generate enough money from the sale to supplement your disposal income. If selling your car is not feasible, see if there is some other valuable possession you could sell.
Solution #4 Find a part-time job
Late payments, missed payments or simply neglecting the loan altogether will result in accumulated late fees, declining credit scores and potential legal troubles. Don't let the situation escalate to that point.
Look for part-time work possibilities to augment your income. Not only could this help you make your monthly payments, but it could help you pay off any other debts you may have.
The bottom line:
Do all you can to avoid missing payments. If you know you've fallen into financial woes and you simply can't afford to pay back your personal loan, explore these steps to ensure you can continue making your regular payments. Your short- and long-term financial health depends on it.
Have another personal loan question? Find answers on our Personal Loans FAQ page.