Can’t pay a personal loan? Follow these 6 steps

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With a dose of diligence and a dash of creativity, late borrowers can make up for their personal loan debt. (iStock)

With interest rates low and many Americans looking to consolidate household debt into one simple payment, personal loans are quickly becoming an “in demand” consumer finance tool in 2020.

Data from Finder.com shows that 114.4 million Americans took out a personal loan between February 2019 and February 2020. Almost a third (31.8%) of these borrowers took out a personal loan to consolidate their debts. , while 21% used personal loan funds to renovate their homes.

Whenever you are considering taking out a personal loan or refinancing, turn to Credible. Credible can show you rates from 4.99% APR with loan amounts of $ 600 to $ 100,000 available. Click here to browse your options.

Obviously, taking out a personal loan and repaying it are two different subjects – the “repayment of the personal loan” part being a more demanding scenario.

“We often find that borrowers who fall behind on personal debt are living beyond their means and trying to maintain a lifestyle that their income cannot support,” said Francis Collins, senior vice president, administration of credit at Teachers Federal Credit Union in Hauppauge. , New York

The financial damage accumulated when a borrower cannot repay a personal loan goes beyond the stress of missed payments. “You will not only accumulate late fees, but you will also run the risk of damaging your credit score and seeing debt collectors bombard you with endless calls,” said Matt Rostosky, owner of Cashofferkey, a real estate investment company in Louisville, Ky.

Dealing With Personal Loan Debt

If a borrower is really stuck and cannot repay a personal loan, what recourse is available? In fact, there are several remedies at play – with these loan management solutions at the top of the list.

  1. Contact your lender immediately
  2. Make a list – and make a repayment plan
  3. Get good financial aid
  4. Find out about the deferral of loan payments
  5. Talk to a credit counselor
  6. Refinance into a personal loan at a lower cost

1. Contact your lender immediately: Don’t leave an unpaid monthly bill without talking to the personal lender.

“If you’re having trouble with a personal loan, contact your lender and see if they can find a forbearance or restructure the deal,” said Juan Carlos Cruz, founder of Britewater Financial Group in Brooklyn, NY. “Lenders can be able to take part of the monthly payment and add it to the back of the overdue loan Approval, terms and new payments will need to be determined by the lender.

If you are looking for more information on personal loans or are considering taking out another loan, use a marketplace like Credible to save time comparing rates from top lenders.

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2. Make a list and establish a repayment plan: At Teachers Federal Credit Union, Collins advises her clients to make a list of all personal debts, including debt balance, interest rate, and terms.

“List the assets available to pay off debt, including your home equity, if applicable,” Collins said. “Next, start planning a method of debt repayment, which may include taking out a low rate personal loan or a home equity loan for consolidation.”

“If these options are not available to the consumer, they should start by tackling the highest interest rate debt by making payments above the minimum required,” Collins added. “Paying off the high-interest debt first will speed up the process. “

3. Get good financial aid: When a borrower is struggling to make a plan and catch up on debt, Collins recommends speaking to a financial professional and seeking help.

“Your local credit unions often have partnerships with financial welfare companies that work with borrowers to establish a debt management plan and provide a path to financial relief,” Collins said.

Credible can also advise you on your personal loans. To streamline your loan process, head over to Credible’s website, where you can answer a few simple questions and receive actual rates, not estimates.

5 DIFFERENT TYPES OF PERSONAL LOANS TO CONSIDER4. Find out about deferred loan payments: If a borrower’s financial hardship is temporary – and a missed payment or two is reality – ask the lender for a temporary deferral of the loan payment.

“If this is a short-term situation, they might be willing to defer repayment for a month,” said Anna Serio, head of business loans at Finder.com, a personal money management platform. “Many lenders are also offering a long-term deferral to people who have been affected by the coronavirus. “

“Plus, deferral or preemptive forbearance may actually work in your favor when applying for credit in the future – it shows that you were on top of your finances and that you acted in your best interests. yourself and your creditor, ”Serio said.

5. Talk to a credit counselor: If it’s too late and the personal loan is already past due, consider signing up for a session at a nonprofit credit counseling agency.

“Your credit counselor will look at your finances, identify the source of the problem, and work with you to develop an action plan to get out of debt,” Serio said. “Just make sure it’s a non-profit agency – they usually offer free credit counseling.”

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6. Refinance into a personal loan at a lower cost: With low interest rates, refinancing a personal loan with a lower interest rate can save money and provide other benefits.

“Obtaining a new personal loan through refinance will give you more time to pay off your debt,” Rostosky said. “This allows you to effectively compensate for missed payments. “

Personal loan consumers can find several personal loan refinancing options – including refinancing a mortgage to free up more money – at Credible.com. There, borrowers can compare loans and rates and get approved in just days – or sooner. Personal loans are quickly becoming an “in demand” consumer finance tool in 2020.

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