What to Do if You Can’t Make Loan Payments on Time

how to deal with debt

If you’re struggling to make loan payments on time, you’re not alone. In New Zealand, life can throw unexpected expenses our way, and it’s not always easy to keep up with financial obligationsšŸ’ø. But if you miss a loan payment, it’s important to take action as soon as possible to avoid further damage to your credit score, finances, and relationships with lenders. In this article, we’ll go over what to do if you miss a loan payment and how to get back on trackšŸ’Ŗ.

Understand the Consequences of Late or Missed Payments

When you miss a loan payment in New Zealand, there are several negative consequences that can occuršŸš«. First and foremost, your credit score will take a hit. Late or missed payments can stay on your credit report for up to seven years and can make it harder to get approved for future loans, credit cards, or even a rental application. Additionally, your lender may charge you late fees or penalties, which can add up over time and make it even harder to catch up on missed payments. If you continue to miss payments, your lender may also take legal action against you, which can result in wage garnishment or even repossession of your collateralšŸ˜–.

Assess Your Financial Situation

Before you can start taking action to get back on track with your loan payments, it’s important to assess your current financial situationāœ…. This means taking a hard look at your income, expenses, and debts. Make a list of all your debts, including your loan payments, and compare that to your income. If your expenses exceed your income, it’s time to make some changes. Consider creating a budget and tracking your spending to identify areas where you can cut back. Alternate finance has a great monthly budget planner that you can use. You may also need to look for ways to increase your income, such as taking on a side job or asking for a raise at work.

Contact Your Lender

Once you’ve assessed your financial situation and have a better understanding of what you can afford, it’s time to contact your lender. Many responsible lenders in New Zealand are willing to work with borrowers who are struggling to make loan payments, as they would rather find a solution than have to take legal action against youšŸ‘. When you contact your lender, be honest about your situation and explain why you’re struggling to make payments. Ask if they offer any loan modifications, debt consolidation or restructuring options that could help make your payments more affordable. Keep in mind that not all lenders offer these options, but it’s worth asking.

Explore Alternative Payment Options

If your lender doesn’t offer loan modifications or restructuring options, or if you’re still struggling to make payments even with those options, it’s time to explore alternative payment options. There are several options available that can help you get back on track with your loan payments.

Forbearance:

One option is forbearance, which allows you to temporarily stop making payments or reduce your payment amount for a set period of timeā³. Forbearance can be helpful if you’re experiencing a temporary hardship, such as a medical emergency or job loss. During the forbearance period, interest may still accrue on your loan, so it’s important to understand the terms of the forbearance before agreeing to it.

Deferment:

Another option is deferment, which allows you to temporarily postpone your payments. Deferment is typically granted if you’re experiencing a financial hardship or if you’re enrolled in schoolšŸ“. During the deferment period, interest may still accrue on your loan, so it’s important to understand the terms of the deferment before agreeing to it.

Refinancing:

Refinancing your loan is also an option to consider, as it can lower your interest rate and make your payments more affordable. Refinancing involves taking out a new loan (Debt consolidation) with a lower interest rate and using that loan to pay off your existing loans. This can save you money over the life of the loan and make your payments more manageablešŸŒ±. However, keep in mind that refinancing may come with fees and may not be an option if your credit score has taken a hit since you first took out the loan.

Seek Professional Help

If you’re struggling to make loan payments and are feeling overwhelmed, it’s important to seek professional helpšŸ¤. There are several resources available to help you get back on track with your finances and manage your debt.

Here are some options to consider:

āœ… Financial Mentors New Zealand:

Financial Mentors New Zealand is a non-profit organization that provides free financial mentoring services to New Zealanders who are struggling with debt and financial difficulties. Their trained financial mentors can help you create a budget, negotiate with creditors, and develop a plan to pay off your debts.

āœ… Citizens Advice Bureau

The Citizens Advice Bureau is another non-profit organization that provides free advice and support to people in financial difficulty. They can help you understand your legal rights, provide information about debt management options, and refer you to other support services if necessary.

āœ… Salvation Army Budgeting Services

The Salvation Army Budgeting Services offer free budgeting advice and support to people in financial difficulty. They can help you create a budget, negotiate with creditors, and develop a plan to pay off your debts.

āœ… New Zealand Federation of Family Budgeting Services

The New Zealand Federation of Family Budgeting Services is a non-profit organization that provides free budgeting advice and support to families and individuals across New Zealand. Their trained budget advisors can help you create a budget, negotiate with creditors, and develop a plan to pay off your debts.

āœ… Ministry of Social Development

The Ministry of Social Development provides a range of financial assistance and support services to New Zealanders who are struggling with financial difficulties. This includes support for families, individuals, and businesses, as well as financial hardship assistance and budgeting advice.

āœ… Financial Advisor

A financial advisor can help you assess your financial situation, create a budget, and come up with a plan to get back on track with your loan payments. They can also help you understand your options for loan modifications, refinancing, or other payment options.

āœ… Credit Counseling

Credit counseling is another option to consider, especially if you’re struggling with multiple debts. A credit counselor can work with you to create a debt management plan that can help you pay off your debts over time. They can also negotiate with your lenders on your behalf and help you understand your options for loan modifications or restructuring.

Conclusion

Missing a loan payment can be stressful and overwhelmingšŸ˜–, but it’s important to take action as soon as possible to avoid further damage to your credit score and finances. If you’re struggling to make loan payments, assess your financial situation, contact your lender, explore alternative payment options, and seek professional help if necessary. Remember, you’re not alone, and there are resources available to help you get back on track with your financesāœ….

Ash

Ash is a professional content writer with extensive experience in business development in the financial services. Ash has founded businesses from the age of 19, including franchising ventures, and working alongside some of the largest retailers in the world.

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