If you are in financial difficulty, lenders have a duty to offer options to help. You might be able to reduce your monthly loan repayments to make them more manageable by extending the term of your loan, however, you're also likely to pay more overall.
You can opt for part prepayment. Most lenders offer the option to partially prepay a significant portion of your loan after you have repaid a certain number (typically 12) EMIs. The way it works is that you pay a large sum of money which gets subtracted from your outstanding principal amount.
When you stop paying a personal loan, the consequences depend on the type of loan and how overdue your payments become. Failing to pay could result in your account going into default, the balance being sent to collections, your lender taking legal action against you and your credit score dropping significantly.
Personal loan debt settlement is a process where you negotiate with your lender to accept less than the full amount you owe to settle your debt. This process can be a lifesaver for those struggling with financial hardship.
You can lower a monthly personal loan payment if you qualify for a lower interest rate or choose a longer repayment term. However, choosing a longer repayment term without a lower interest rate can cost you significantly more interest over time.
The borrower can apply for debt forgiveness on compassionate grounds by writing about the financial difficulties and requesting the creditor to cancel the debt amount.
Debt consolidation can be a useful financial tool for anyone with multiple debts. It can help you simplify your finances and reduce your interest costs and monthly payments.
Make the Call. One of the best things you can do to improve your situation is to call your lender. Chances are they'll be willing to work with you if you're struggling to make your payments. That's especially true during a recession, natural disaster, or other large scale event with an economic impact.
Higher Interest Rates for Poor Credit
While personal loans can be a great way to get financial relief, they may come with higher interest rates, especially for those with lower credit scores. Lenders set these rates to compensate for the increased risk, which could make the loan more expensive for you.
Refinancing a personal loan lets you replace your existing loan with a new loan — potentially with a lower interest rate and smaller monthly payment. Deciding to refinance a personal loan might be a good option if your credit score has recently improved, which can help you score a more competitive interest rate.
If you're in a short-term financial bind, you may qualify for a deferment or a forbearance. With either of these options, you can temporarily suspend your payments. But keep in mind that forbearance and deferment have pros and cons.
Remember, debt consolidation loans are great for doing what their name implies, consolidating debt. Choose a personal loan only if you have cash flow needs. This isn't a step that should be taken lightly, so take your time doing the required research before making a final decision.
Freedom Debt Relief is a legitimate debt settlement company founded in 2002. It's accredited by the Better Business Bureau (BBB) with an A+ rating and holds an accreditation from the American Association for Debt Resolution (AADR).
If you do it right, debt consolidation might slightly decrease your score temporarily. The drop will come from a hard inquiry that appears on your credit reports every time you apply for credit. But, according to Experian, the decrease is normally less than 5 points and your score should rebound within a few months.
After you fail to make a few payments, your loan will be considered in default, which essentially means that you've failed to follow through on the terms of your loan agreement. Once you're in default, you can be contacted by debt collectors and even be asked to appear in court.
Try to negotiate or shop around if you're not happy with the interest that you get. Shorter terms usually mean less overall interest, but be sure that you can afford the repayment amount (even if something unexpected happens to your finances).
Debt forgiveness is usually available for unsecured debts like credit cards, personal loans, or student loans. Secured debts like a mortgage or a car loan are not usually eligible for debt forgiveness. If you default on a secured debt, the lender will likely pursue foreclosure or repossession.
When it comes to credit card debt relief, it's important to dispel a common misconception: There are no government-sponsored programs specifically designed to eliminate credit card debt. So, you should be wary of any offers claiming to represent such government initiatives, as they may be misleading or fraudulent.