Got an impatient money lender breathing down your neck? Not sure how to get the heap of unsecured loans out of your way? Not to worry!
While defaulting is hardly ever anyone’s intention, sometimes life throws you curveballs. These curveballs can take the form of an emergency, a job loss, poor tax compliance, or a raging pandemic that sinks your business profits. Such instances can impose some strain on your budget, hence hindering you from making timely payments. Consequently, we’ve compiled a list of the five most common reasons why you might be struggling to pay back your lender, and how you can navigate them.
You’re overstretching with your monthly installments
When applying for a fast cash loan, opting for a short repayment window sounds fantastic until you learn what comes with it. The thing is, while it’s great to pay off your loan fast, taking heavy monthly installments could be unsustainable. Most people find themselves in situations where they’re unable to uphold their loan agreement, or they’re racking up more debt to pay their other bills.
If your circumstances change, the best thing to do is approach your money lender so that they can make adjustments to your repayment schedule.
You’re using an old budget
Got a loan you need to pay off fast? Get rid of your old budget ASAP! If your cash flow remains the same despite having an additional financial obligation, the only sensible thing to do is narrow your spending. You can narrow your expenses by completely omitting certain things from your budget or replacing them with cheaper alternatives. For instance, if your family eats out twice a week, you can stop eating out completely, reduce the frequency to one time a week, or continue eating out at a cheaper restaurant. Doing so will help free up enough cash to cover your current bills while leaving some wiggle room for scaling down unsecured loans.
You’ve not considered refinancing or consolidating your loans
There comes a time when debt consolidation is the best alternative to lift your financial troubles. Debt consolidation simply refers to the financial practice of taking a lower-interest debt to help pay off multiple existing loans. Assuming you have an auto loan, a student loan, and a holiday loan, debt consolidation helps bundle them into one debt, which you can pay off using one debt consolidation loan. This can be a great option if:
- You owe multiple unsecured loans with different interest rates, due dates, and monthly installment plans
- Your credit score allows you to get a cash loan at a low-interest rate
- You’re able to pay back the consolidation loan in five years
- You have several high-interest debts eating into your wallet
You’ve not asked your money lender for a payment holiday
Do you know that you can request a money lender to exempt you from debt repayment for an agreed period? This period is also called deferment.If you’re struggling to make timely payments due to unemployment or physical incapacitation, this can be a good option as opposed to paying late and accumulating extra penalties. A debt holiday in Singapore can last six months, or even twelve months- depending on a money lender’s rules.
However, make sure you know what’s involved. Some high-interest loans can end up accruing an insurmountable amount of interest, making them even more costly.
You’re trying to get rid of multiple debts simultaneously
Killing multiple birds with one stone hardly ever works with unsecured loans. More so, if these loans have different interest rates yet you’re making similar monthly payments for all of them. Such instances call for making the difficult decision of picking which cash loan to pay first, and which ones to wait in line. If you’re focused on saving money, prioritise the unsecured loans with the highest interest, as you make minimum payments for your other loans. Once you eliminate this one, move to the next highest interest rate. This strategy prevents you from accruing costly interest amounts.
While struggling to pay loans isn’t an offense, failing to inform your money lender is. Missing payments for three consecutive months causes it to be termed as defaulting, which might invite legal action from your lender.