Expert loan views & facts

Many people currently feel the pressure when it comes to meeting their financial commitments – and loans are no exception. The credit crunch and rising costs of living mean that what was once a matter of simple budgeting has now become a balancing act, trying to make sure all your commitments are met without going into the red.

Finding yourself falling behind on loan payments is no more pleasant for you than it is for the lender – but there are things you can do to help yourself out of trouble.

What if I’m only just falling behind on my loan repayments?

Firstly and most importantly, if you either think you are about to miss a loan payment, or if you have just missed one, contact your lender. Lenders will appreciate the fact that you acknowledge the problem, and this will put you in a much better light than if you ignored the problem. Tackling the problem early may avoid your lender notifying credit reference agencies, which could be crucial to obtaining credit in the future.

At this stage, it’s most likely that the lender will try to arrange an alternative payment schedule, rather than demanding the missed payment straight away. This means you are in a better position to make future loan payments, which is a good situation for both you and the lender.

Your alternative payment arrangements may involve spreading the missed payment(s) out on top of several other repayments, or simply paying the full amount at a later date. In some cases, a lender may grant you a ‘payment holiday’ on your loan – a pause in payments, usually no longer than a few months, after which payments resume as normal.

However, be aware that with either of these repayment methods, you will probably still be expected to pay the interest on the missed payments.

What will happen if I’ve missed several payments?

If you have defaulted on several payments, your lender will probably begin to take more serious measures to reclaim the money they are owed. Some lenders will still be willing to arrange alternative payments, but many will demand the outstanding amount in full.

This is when the real problems can begin: to avoid the possibility of court action, you’ll need to find the money quickly or find an alternative plan of action.

If you don’t think you will be able to keep up on loan payments, it’s essential you seek expert debt advice. A professional debt adviser can talk you through a range of options that could help you get out of debt, including debt management plans, debt consolidation and IVAs (Individual Voluntary Arrangements).

What not to do

What’s most important is that you don’t make the problem any worse. Recent studies suggest that many people are taking out further credit such as credit cards, or another loan, to make their loan repayments. This only delays the problem – you will still have to pay everything back eventually – so it makes much more sense to seek the appropriate debt advice.