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Here’s What Will Happen With Payment Slip-Ups and Unpaid Loans

May 14, 2021

There is the age-old thinking that it is fine to rack up debt now, since the borrower can recoup it in a few months’ or a few years’ time. This is more wishful thinking, especially for people without regular jobs, or still shifting careers, thereby ending up with personal loans defaults.

Thinking you can borrow more than what you really need because you can pay it back anyway sometime soon is, more often than not, grounded on fantasy. See, anything can unfold, bills happen, and when you begin the habit of making a late payment, it can evolve into a huge problem and lots of headaches.

So, what does it mean to default on a loan?  It is facing unforeseen circumstances or the possible overlapping of debts, resulting to failure to pay back a loan and becoming overdue for 30 days, or up to 90 days. Incurring late payment charges for missing the due date for only a few days makes the account delinquent, not in default.

With unpaid loans, what happens is that interest is added to the original loan or principal (on which the lending body calculates the interest and returns). Whether you forgot to pay or willfully skip the date of the monthly loan payment and the loan has gone into default, it wends its way to the collection department and your credit score takes a hit. Credit score is the measurement of one’s ability to manage debt.

Prolonged non-payment of debt will incur accrued interest (the accumulated interest on a loan that may not have been paid yet but has become part of the borrower’s payable). Understanding the accrual rate and other basic components of a loan can help individuals in debt create a plan to pay it off rather than drag it on for years or even a lifetime.

A delinquent borrower, or one who has gone into default on a loan, can do something about it, the quicker the better. The financial institution or lending company may contact the borrower, or the borrower can take the initiative to call up the firm the loan was obtained from, to explain and work out a payment arrangement.

Does a one day late payment affect credit score? The answer is no. The person who took out the loan simply has  to pay it off as soon as possible. Making the next payments on time, paying interest as it accrues, and not skipping mortgage payment, or student loan payment, credit card payment, or whatever loan you have taken – in other words not being careless with financial obligations that include loans – can save you serious trouble, notably sinking into the deep hole of debt

How Not to Default on Loan

To stay in control of financial decisions, the first thing you need to do is to create a budget, and stick to it.  Eliminate guesswork and know what happens if you don’t pay a loan company back. You will likely get calls from debt collectors, or if you avoid them, they may try to reach your listed references (friends or associates). In the meantime, the past due notices will keep coming. Your wages may be garnished, or you may eventually get sued.

What happens after 7 years of not paying debt? Keep in mind that a single late payment can remain on your credit report for seven years if it has remained unpaid beyond 30 days.  Late payments, debt collections and other negative things will be listed in your credit report, and as per the Fair Credit Reporting Act, the time limit is seven years. After that, certain reports may still remain, and the actual debt does not get erased after the seven-year mark.

What do all these point to? It is important to be a responsible borrower. Avoiding late payments is but one of the things a responsible borrower needs to do. When you ran out of funds for necessities or an important payable, you sought the help of professional lenders and financial institutions (tied up to your credit cards). Hence, you need to honor the agreement you made with them, and strive hard not to default on a loan.

Your responsibility as a borrower extends throughout the repayment stage. When entering repayment plans, do it with clear understanding of your obligations, and exit with grace, meaning with very seldom or no late payments.

Let’s say you have worked out a repayment plan to avoid the endless calls of collection agency representatives. However, something unexpected occurs again and you go back to defaulting on a loan. You should contact your loan servicer or lender anew and inform them that you are having difficulty on making the scheduled loan payments.  The other party would then draw up a list of options to enable you to keep up with payments.

Some creditors can be harsh, and the penalties when you default on a loan stiff. However, being harassed no end and feeling miserable with all your late payments or missed payment credit score hit should not deter you from finding a resolution.

Alternative Financing to the Rescue

You can focus on generating multiple streams of income that you can continually manage, and allow them to fall into place. You can then reach your future financial goals.

Overall, getting a loan may not be all bad, for as long as you honor your part of the agreement, and it may help a great deal if the terms and interests are flexible. Opting for alternative financing like a P2P funding platform may be more suitable than a traditional one.

A peer-to-peer funding platform like Blend.ph has an application process that is hassle-free, since you can create an account online and find the interest rate for your desired loan product there. Another upside is the existence of  a true sense of community at the  P2P lender site.

The Blend.ph official social media site is abuzz with energy. Borrowers as well as franchise partners eagerly exchange information about positive experiences. 

As a P2P lender, the company has a third-party collection team that handles collection. After borrowers skip a loan payment again after the first written notice, they can expect a demand letter. With Blend.ph’s Auto Investment arrangement, as far as lenders are concerned, even if borrowers’ default on a loan, investors get returns at 9 percent annual interest.

Let Blend.ph team show you how you can earn interest payments if you want to be an investor, and how you can pay all your bills and consolidate them if you are a loan applicant inching your way to financial wellness. Drop us a line at [email protected] or call us at tel. no. 8293-3628 to borrow with ease and be prepared for sudden needs like medical treatment or income loss.