What if you can no longer repay your loans?
When taking on a loan, one usually expects to be able to repay the loans on time. However, there are often many emergencies in life that are not always predictable in advance. Loss of a job, economic crisis, family growth, accident or other accident affects a person’s financial situation.
Especially when a person has a mandatory monthly payment, such emergencies can lead to people becoming insolvent or causing large debts. However, even in this unenviable situation, where personal budgets are rapidly approaching zero and credit arrears are just building up, action can be taken to improve the situation.
When it comes to this kind of deadlock, the key is not to let everything go down the drain but to act. The first step to take is to report the financial crisis and insolvency to the bank or credit institution that issued the loan or loans.
You should definitely go to a debt counselor to help people who are directly in this situation
The debt counselor will familiarize yourself with the individual’s credit history, current income and jointly assist with the payment schedule. Banks and credit institutions offer a variety of solutions to help the borrower repay the loan because no institution is interested in leading the person to insolvency.
If the financial difficulties are temporary, you may request an extension of the loan repayment period
Except for quick loans, where such a service is offered for a fee, the other types of credit are relatively free of charge. Extending the term means that your monthly payments will decrease, but as your credit obligations with your bank or credit institution become longer, it should be taken into account that interest is paid throughout the repayment period.
One of the services offered is credit vacation
With the help of a debt counselor, you can reach out to lenders and request a credit vacation. This means that monthly payments are deferred for a specific period to be agreed between the bank or the private creditors and the individual. For the most part, the lender grants part-time credit breaks, during which the borrower only has to pay interest on the credit.
If you are granted a full credit vacation, you do not have to pay any monthly interest payments either
During this time it is possible for a person to look for ways to improve their income or to deal with an emergency that would not be possible due to monthly payments. After the end of the credit holiday, the person must resume the monthly payments, plus any outstanding payments during the credit holiday. They are distributed evenly throughout the repayment term. An individual may also request an extension of the time limit.
One of the services offered by banks and credit institutions is credit consolidation. This means that if a person has multiple loans and still with different lenders, then it is possible to combine all of these loans. In this case, only one monthly payment remains. In addition, usually smaller loans with a faster repayment period always have a much higher interest rate. Choosing the option to consolidate loans has one bigger loan for an individual, but the interest rate on long-term loans, such as consumer or mortgage, is much lower (3-5%). While this option does not exempt you from paying the loan, it does save you some money that would have been spent on paying the interest in the previous case.
In the event of a credit default, it is also important for the individual to reorganize their daily lives by seeking additional help from the lender. If a bank or a private creditor has provided assistance with a credit vacation, grace period or credit restructuring, an individual should not have to imagine that all the problems are over.
- First of all, the most important thing is not to return to this situation again – although it is always necessary to purchase, repair, improve something, you should not give in to such whims unless they are vitally important.
- Certainly one should avoid repeated borrowing .
- It is also important to start making savings , which in a similar situation could reduce debt. A good way to save money is to create a reserve fund. However, it would only be more realistic to do so once a person has a stable income and is able to make monthly payments without delay. The Reserve Fund will perform a security function in the event of unforeseen circumstances requiring cash outflows.
Everyday spending plays an important role in trying to get out of financial hardship, and definitely cut back! Even limiting yourself when shopping – you don’t have to buy a sweet every time you shop.
Although this saves only a few cents, it is possible to accumulate a sufficient amount of money over time, as the amount of the small money increases. During austerity, you must also avoid unnecessary entertainment, visits to a beauty salon or hairdresser, or the purchase of unnecessary clothing. It is also an opportunity to give up harmful habits, such as smoking or regular alcohol consumption, as such habits consume a great deal of money, even though one may not even notice it. It will also help your health.
If the financial crisis cannot be mitigated with such modest means, one should definitely consider more drastic austerity techniques. One of the options is moving to a cheaper place to live or, if the living space has such opportunities, renting a room that can be profitable. Another alternative is to sell the machine or replace it with a cheaper model. The sale of excess property will also generate some profit.
Finding a second job or earning another is another way to improve your financial situation
Of course, this is not always possible, but if there is one, then you should definitely use it. If you have lost your job and cannot find it yourself, you should definitely contact the State Employment Agency and register as unemployed. This way, the individual will always receive information on the latest vacancies as well as unemployment benefits.
Do not despair when it comes to credit traps and financial difficulties. The most important thing is to understand that any situation can be solved – it is imperative to seek the help of professionals, as well as to change your life and reduce your daily expenses.