What to Do When You Can’t Afford Loan Payments
Many people in the U.S. are drowning in debt. In fact, the average family in the U.S. has about $135,768 in debt. Based on this staggering statistic, it’s not hard to see why many people struggle to make their loan payments every month. If you are ever in this situation, it’s important to know what to do to protect your financial future. Here are your options if you can no longer afford loan payments:
Contact Your Creditors
It’s best to contact your creditors as soon as you realize you will not be able to make your monthly payments. Believe it or not, there are many lenders who are more than willing to work with borrowers to resolve this problem.
For example, if your financial difficulties are temporary, a lender may let you push back the due date by a few weeks to give you more time. Sometimes, lenders may even allow you to skip a few monthly payments so you don’t fall behind. If you will never be able to repay the loan, the lender may be open to negotiating a settlement. This will allow you to clear your debt by paying less than what is owed.
If your loan payments are too high, consider refinancing your loan. Refinancing is the process of replacing an existing loan with another loan that has more attractive terms. For example, say your car title loan payments are too high. Contact a lender that offers car title loan refinancing to see if they are willing to offer you a loan with a lower interest rate. If you are approved, you can get rid of your existing loan and make payments on this new, low interest loan instead.
Consolidate Your Debt
Debt consolidation is another option. A debt consolidation loan is a low interest loan that is used to pay off the balances on other debts. For example, if you have five different credit card debts, you can take out a debt consolidation loan to pay off all of these balances. Because the interest rate is lower, you will end up paying less over time by consolidating your debts in this manner. Taking out this type of loan will lower your monthly payments, which may make them more affordable.
There may come a time where you need to decide which payments you should make and which you should not. This is a difficult decision that should not be taken lightly. Each person’s financial situation is unique, but in general, it’s best to prioritize secured loans over unsecured loans. This means you should continue making payments on your mortgage and car loan while temporarily holding off on credit card and other loan payments. This strategy will ensure you don’t lose your home or vehicle as a result of your financial trouble.
Regardless of which option you choose, the key to getting out of this situation is taking immediate action. Don’t wait until creditors are threatening to file a lawsuit—be proactive when it comes to figuring out your finances.