What to do when you can’t repay your loans?


When you have debts, you can easily fall in financial difficulties, for example, you can lose your job, your wage can be reduced, you can have a family growth, you can change your living place, you can experience some unplanned situations which cost the money etc. In such and similar financial difficulties borrower’s creditworthiness decreases, namely, the borrower is not able to pay for credit fully and regularly. In such situations never ignore your problems and do not hope that they will be resolved by someone else.

It should be mentioned, that you have to inform your lender about your ability or inability to pay, because it is borrower’s responsibility, not lender’s responsibility. Do not forget, that every credit payment which is hindered, is repaid incompletely or is not repaid at all, damages borrower’s credit history which endangers its potential loan commitments in the future, encumbering and making it impossible to borrow the money regardless of lender and type of credit. Remember, when you feel that your ability to pay becomes weaker, immediately talk to your lender which will try to find the best solution for your situation.

One of solutions, which can be offered to borrower in case of deterioration of its creditworthiness, is grace period. Grace period is period of loan commitments when the borrower makes only interest payments or only loan principal payments without interests. In cases when borrower’s financial situation is hopeless and serious, lender can cancel both interest payments and loan principal payments, but only for a period which is not longer than six months or, in other words, half year. It should be mentioned that grace period is always period of time with specific term, not some mystical time in the future which lasts as long as borrower’s financial situation improves.

Grace period can be applied only for those borrowers who have borrowed specific amount of money, namely, your debt has to be big enough to get the grace period. It is also have to be mentioned, that grace period can be used only once in a year. Length of grace period depends on several individual factors. Before you decide to use a grace period, you have to know, that after grace period your monthly loan payments will be a little bit bigger in order to compensate lender’s financial loss which appeared during your grace period.

Talking about other solutions, which can be offered to the borrower in case of decrease of creditworthiness, is application of different conditions or different repayment schedule which can relieve borrower’s financial problems. Remember, that your financial problems have to be solved not only by the lender, but also by yourself, searching for additional resources of income or reducing of your monthly expenses.