What Are Your Options When You Can’t Pay Back Your Loan?

If you find that you are not able to make your loan repayments in time, you should explore what you can do to lessen your financial damage before it becomes impossible to clean it up. If you don’t pay, you will be declared a defaulter and the total sum outstanding will zoom as to the interest, fees, and penalties accumulate. Your credit score will take a massive hit, and you may even need to file for bankruptcy. So, what are your options?

Make the Payment Late

If you are not in a position to make the due payments in time, consider paying late after saving enough. If you manage to pay within 30 days of the due date, you will generally find that credit bureaus are not informed about the late payments. This means that your credit score does not take a hit and you can seek refinance or consolidation without worry.

Refinance the Debt

Missing out on making credit card payments creates problems mainly because the outstanding amount piles up fast due to the application of high rate of interest and penalties. Seeking refinance for all card dues and personal loan balances from a financier like http://libertylending.com/ will allow you to take the benefit of a lower rate of interest and also make your monthly payments more affordable by extending the repayment period.

Securing the Loan

You tend to get far better terms and conditions if you are in a position to secure your new loan by pledging an unencumbered asset. However, the downside is that you could lose it if you default on the payment. This means that if you have staked your home, you could be left without a roof over your head at a time when you don’t have any savings. Even losing your car could prove to be very inconvenient as it may hamper your income.

Negotiate with Lenders

If you anticipate having trouble with making payments due to some life-changing events like a job loss, a divorce or a medical emergency, you should discuss with your lenders who could then allow you a repayment holiday, reduce the rate of interest or even agree to settle the due for substantially less. However, debt settlement is successful only when the lender feels insecure enough to think settling for less is better than getting nothing from a client who’s broke. The credit score will get negatively impacted when you undergo a settlement.

Payment Prioritization

If you are certain that you don’t have enough to pay all the monthly payments required, you need to decide which debts to stop paying off. It is usually wiser to keep paying the secured loans to avoid losing your assets while the unsecured ones can be stopped. While you will end up damaging your credit score, you can minimize the disruption to your life.



When experiencing financial distress, it is best to try debt restructuring by refinancing or consolidation. Remember stopping, deferring or settling debts can injure your credit score and affect your borrowing power.

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