What to Expect for Non-Payment of Your Loan
Non-payment or late repayments can cause great damage your financial health. However, when armed with the right information and by developing the proper money habits, you can easily find your way back to the path to financial wellness. In this article, we’re going to break down what non-payment means, what its consequences are, and what you can do if you missed your payment or are about to miss one.
The Cambridge dictionary defines non-payment as an individual’s failure to pay a sum of money that is owed. If you decide to apply on the Blend PH platform for any time of loan, your financial standing could take a bad hit if you are late or if you fail to make a repayment based on the agreed date.
When life brings you surprises and you can’t afford to make payments on your loan, it’s best to take action immediately to minimize the damage to your finances. It would help to find ways to mitigate the situation and prevent things from turning bad to worse. It’s plainly less stressful that way.
Sometimes, the solution can be right before your eyes. For instance, if you can’t afford to continue running your franchise business, it will be best to sell it to someone else or switch to a smaller business that requires less money to maintain and run. You can even take a pause completely and do other things for a while. Sadly, not everything is as simple as it seems.
What happens when I miss a payment?
If non-payment occurs, we will charge you with additional money. This means that you’ll owe your lender a bigger amount of money. Each loan falls under its own loan type, lender, interest rate, and term agreements but the result will be the same: you’ll owe more money in the form of penalties, fees, and interest charges.
Blend PH’s Terms and Conditions has a specific section for defaults, so you might want to read that. Some of the highlights of the content are reiterated and summarized below:
- If you miss a payment or just partially pay the amount due, we will contact you to attempt to collect the payment.
- We reserve the right to contact borrowers through any method including (but not limited to) letters, emails, phone calls, SMS, or private messages on your social media account.
- If our attempts to collect the funds fail two (2) days after the payment due date, we will treat your account as an overdue account, and we’ll keep attempting to collect the money on your investor’s behalf.
- If payment has not been made seven (7) days after the due date, we shall charge you an administration of up to 1.25% of the missed payment amount (principal plus interest) per month.
- We may also charge other fees to cover our legwork for collecting the payment from you.
- If you miss, fail to pay, or only partially pay three (3) or more consecutive monthly installments or otherwise pay to comply with your loan conditions, the loan will be placed into default and we will issue you with a default notice and termination notice and will pursue you for the total loan amount outstanding, including corresponding penalty charges accrued while being in default.
- We will give you 17 days’ notice before filing a default on your credit reference file with the credit bureau.
What are the consequences of defaulting on my loan?
When you default on a loan, you can expect to get stressful phone calls or messages from debt collectors. Below, we’re listing down some of the things that can happen after your loan goes on default:
- You’ll get a lower . Since your repayment history plays a huge part in determining your credit score, defaults will definitely go to your credit report and impact your score negatively.
- It will be harder for you to qualify for new credit. When you default on a loan, you earn a low credit score which means you are not creditworthy. And even if you get approved for another loan or financial product, you might get uncompetitive rates if you have a recent default on your records.
- You’ll lose your collateral. This only applies to secured loans and not on the products offered by Blend PH. However, if you applied for secured loans somewhere else, defaulting could mean losing a collateral such as a car or a property.
Will I go to jail if I have an unpaid loan?
As explicitly stated in the 1987 Philippine Constitution under Section 20 of Article III, no one shall be imprisoned due to debt, so you don’t need to worry about debt collectors threatening you that they will send out the police to arrest you tomorrow.
Nevertheless, the law draws a distinction when you commit acts with the intention to defraud, such as issuing a bouncing check or when you intentionally abandon your address or place of employment without informing your credit issuer of where you can actually be found.
What should I do if I already know I won’t be able to pay?
Fortunately, there are steps you can take when you know that you’re going to miss your due date or if you’ve already skipped your repayment. You might want to do any of the following, if not all:
- Make a late payment. While it’s absolutely best to repay your loan on time, paying late still stands as the lesser evil when compared to not paying at all. As they always say, “better late than never.” Late payments aren’t reported to credit bureaus so you don’t have to worry about getting a hit on your records.
- Contact your lender and negotiate a settlement. It would be best to alert your lender if you’re having trouble making a repayment. You’d be surprised how much they’re willing to work with you – if you convince them, they might even agree to adjusting your loan term or lowering you repayment amounts to make sure that you honor your contract.
- Check if your employer allows you to get an “advance.” Some companies allow employees left in a tight spot to get advances. It would be best to get in touch with your HR department to see if you’re entitled to such benefits.
- Ask family or friends to back you up. Explain the situation to someone you trust and ask them if they can help out. To avoid future disagreements, it’s best to have a notarized document, which again demonstrates that you’re committed to paying the money back.
- Get in touch with credit counsellor. Try to talk to a credit counsellor who can help you get back on track on your repayments. They might be able to offer solutions that will benefit you in the long run.
The sooner you get your finances in order, the faster you can get rid of the non-payment hit on your credit history. Consider our actionable tips above and start making smarter choices today. Know that you can always take strides in regaining financial health without putting yourself in deeper trouble.