In times of urgent financial needs, many people turn to lenders of payday installment loans and other short-term personal loans to get quick cash even with bad credit. However, since most of these loans may have high interest rates many borrowers are unable to pay on time and sometimes end up in default.
What is a loan default? Basically, a loan default means that you have not met your obligations when it comes to your agreement to repay a loan. This also means missing a payment or being late on a payment. Usually, when you commit a loan default, the lender that you’re indebted to will begin to contact you to get their money. Initial contacts are merely reminders to pay. But as the loan default continues, most lenders tend to be more aggressive and will contact you repeatedly and not very nicely.
Loan defaults can have a direct effect on your credit score. If you are in default for thirty days or more, it will make it harder for you to apply for other loans and can even affect your ability to get a job. Oftentimes, a payday installment loan default results in having the debt turned over to a collection agency. The impact on your credit history worsens over time, but after seven years the impact will decrease.
What can be done in case of loan defaults? As soon as you recognize you have committed a loan default, contact your lender. Go over the situation and discuss with them in detail what your options are. Most payday installment loan lenders would rather work out a repayment solution directly with the borrower than entering into legal action. Oftentimes, placing an account in collection is just a result of a lack of communication between the borrower and the lender. The best way to deal with loan defaults is by being proactive.
What will you do if you still can’t repay the loan? This is the main reason why most borrowers are afraid to be proactive about their loan default situation. They still don’t have the money to pay the debt, so instead of working with their payday installment loan lender, they choose do nothing and hope things will get better. The problem with this is that lenders will assume that you never have any intention to pay. So they will lump you in with the rest of the debtors and treat you rudely.
If the debt is already turned over to a collection agency, what can be done? The best action will be is to negotiate with the collection agency. You can do this through writing a letter via registered mail. It is not advisable to do the negotiations over the phone, because they can ignore you. However, keep in mind that if your debt is already turned over to a collection agency, you should expect that your credit will been affected.
The right approach in dealing loan defaults is by working with your payday installment loan lender promptly. In case your debt has been turned over to collection a agency, communicate only in written and keep your records carefully.