There are times where you will need credit and it can help in many situations, but if you are not able to pay your loan on the date that you originally agreed or you miss payments then credit can become a nightmare. If your financial situation changes or more unexpected occurrences happen then it can create a lot of issues, especially when you are already sitting with outstanding debt.
If you are struggling to pay your loan, then here is what you can do.
Get in Touch with You Loan Providers
If you see that you will not be able to settle your loan balance on the due date or may miss a payment, then the first thing that you will need to do is contact your loan provider. It is a good idea to contact them in writing as proof that you did contact them.
Speak to your loan provider about your situation, inform them that you are not able to pay the loan and ask if they will be willing to work with you to come to an alternative arrangement. Your loan provider is under no obligation to do this, but you might be surprised to find that a lot of lenders will be willing to work with you.
What Happens When You Miss a Payment?
Missing payments does have consequences and here is what happens when you miss the first payment on different types of credit.
Missing Your First Credit Card Payment
When you miss a credit card payment on the agreed date then you will probably incur additional fees and if you miss several credit card payments then you could lose your access to credit cards. You might be able to arrange for your credit card repayment date to be moved to another time in the month, so that you can pay.
Missing Your First Payment on an Instant Loan
Instant loans and payday lenders will require you to pay on a specific agreed date according to the terms and conditions. If you fail to pay and do not make any arrangements with the lender, then you will be issued a legal notice to settle your loan or make arrangements. If you don’t, then your account could be handed to the courts.
Keep in mind that most instant loans are deducted from your bank account when the payment is due and the money is available.
Missing Your First Payment on a Personal Loan
Missing a payment on a personal loan will likely result in a notice to pay from the lender and you may incur additional interest on your loan. If you are about to miss a payment, then you need to contact your loan provider as they might be willing to work with you. There are loan providers that offer debt consolidation loans, which is where you will use credit to settle your debts and then you will have one lower, more affordable loan to pay back.
Missing Your First Payment on a Debit Order
If you have monthly debit order like medical aid or DStv and you do not have enough in your account to pay it, then you may incur additional fees from your bank when payments are declined. Also, money will likely be deducted from your next deposit.
When you miss payments then your credit score will be affected negatively and you will struggle to get credit again in the future.
What Happens When You Don’t Pay?
If you are not able to make an instalment, then you need to try and make alternative arrangements. If you don’t contact your lender, then they will assume that you don’t intend to pay and will proceed down the legal route. Many lenders are willing to work with you, so make sure you contact them.
However, if you have ignored a notice to pay, haven’t settled your account and haven’t contacted your loan provider, then your account will be handed over to a legal representative. You will then be issued with a notice to get in touch with the legal representative and if this is ignored then you could end up in court, which carries costs of its own.
What About Your Credit Score?
You need to know what your credit score is and keep it in good standing. If you miss payments and don’t settle your account then your credit score will be negatively impacted, which will then affect your ability to get credit again in the future.
If You Can’t Handle Your Debt
If you have too much debt and are paying multiple lenders with multiple interest rates, then you should seek the advice of a debt counsellor. They will assess your debt situation and if they find that you are over indebted, then you will be put under debt review. This process will help you to manage your debt and a debt consolidation loan can be used to settle your debts and you will only have one, affordable monthly repayment to make.
If you are struggling with debt then don’t ignore it, speak to your loan providers and if you need help then make sure you get it, so that you can start living a debt free life.