Why Missing A Debt Payment Isn’t Always The End Of The World!


I just want to point out that I am in no way advocating that you stop making your debt repayments. If you’re able to meet your current debt repayments then do so! This article is the first in an upcoming series of posts to help those who feel that they’re no longer able to meet their current debt repayments and don’t know what to do about it! This article will show why in some cases contrary to popular opinion, it can actually make sense to miss a debt payment!

How Bad Is Your Debt Situation?

Under normal circumstances I would never encourage someone to miss a debt payment! It will damage your credit report, you could incur charges and you might start getting hassle from lenders demanding payment. In certain circumstances though it can make sense to miss a debt payment. A common mistake made by people in debt trouble is to try and keep up with their debt repayments at any cost. This can often mean borrowing from family, making a debt payment with a credit card or even borrowing from a loan shark! If you have reached this point in your debt struggle, it might be time to be honest with yourself about how bad your debt problem is. If after honest self examination you realize that your debt situation is unsustainable and you can no longer afford to meet the repayments, missing a debt payment might actually help your situation. How?

Lenders Have An Obligation To Help, But Only When You’re In Financial Difficulty!

In the UK legal guidelines exist that mean lenders have to do all in their power to help borrowers who fall into financial difficulty. The problem is that you’re only classified as being in financial difficulty once you stop making repayments on your debt! Have you ever asked your lender to reduce your debt repayments when your account is up to date? The answer is often a flat no! If you’ve ever fallen behind on debt repayments however, you may have noticed that your lender is more than willing to enter into a financial arrangement to help you bring your account back up to date. This is because you are now viewed as being in financial difficulty and lenders have a legal responsibility to help you, not to mention a financial interest!

Don’t Rob Peter To Pay Paul!

Most people have an inbuilt fear of damaging their credit report! While this is a healthy fear for people whose finances are sound, it should not be the top priority for people whose finances have spiraled out of control! If you find yourself regularly having to meet debt repayments with other forms of credit STOP and review your financial situation. It’s no good preserving your credit rating if it only serves to spiral your debt further out of control. Remember you will only get the financial help you are legally entitled to if you are seen to be in financial difficulty.

A Weight Was Lifted!

A few years ago my financial situation took a turn for the worse and I found that I could no longer meet the repayments on my loan. In an attempt to preserve my credit rating and not default on the loan, I started making the repayments using a credit card. Although my credit report still looked good I was racking up a big credit card balance and was now having to pay the interest on the credit card & meet the loan repayments. This only made things worse and I eventually got to the point where I had to miss the loan repayments anyway. I then received the dreaded phone call from my lender and expected the worst! What was the result? My lender agreed to renegotiate the terms of my loan and although the term of the loan had to be extended, my lender lowered the interest rate payable and reduced the monthly debt payment from £120 to £30. Although the situation was still not ideal, I felt a massive weight had been lifted off my shoulders and I was now able to manage the repayments. The moral of the story? If I’d only done this earlier I wouldn’t have built up the credit card debt!

Keep It Legal!

As we’ve already mentioned if you were to miss a payment with a reputable lender there is legal legislation in place to protect you. If you decide to borrow money from less reputable sources though this legislation might not exist and you may find yourself in quite undesirable circumstances. It’s also worth bearing in mind the family trouble that might be caused if you were to borrow money from a family member to make a debt repayment and find yourself unable to repay!

Although at certain times in our lives we might not want to face up to the true state of our finances, sometimes it can can make sense to miss a debt payment and deal with the problem at source rather than create a bigger problem.

12 Responses to Why Missing A Debt Payment Isn’t Always The End Of The World!

  1. Catherine says:

    This is a great post! In terms of the lenders being more willing to help once you’ve missed a payment or two- I also think they’re more willing to help because they know that if you continue missing payments under current conditions and end up bankrupt they get nothing so lowering interest rates/forgiving a missed payment is better than a big fat goose egg!

  2. Um, that’s kind of an amazing rule! I know from friends that some companies in the US will compromise with you on an total amount or even payment amount/month, but I’m not sure if they have any type of legal obligation to their consumers.

  3. I have had friends who encountered some financial hardship, I remember they ended up talking to their financial institution and explaining that he had lost his job and was unable to meet the repayments.

    I’m not sure of the exact outcome but the bank ended up helping them out by pausing the repayments on the loan for a couple of weeks until he found a new job.

  4. Pauline says:

    When I was living in the UK I read somewhere that if you couldn’t meet payments, you should still try to pay £1 a month to prove good will while a debt repayment plan was figured out between all of your lenders. The Citizen Advice Bureau can also help greatly.

    • Great comment Pauline, I was intending to highlight this in the next article of this mini series. Making token payments will show that you are willing to repay the debt, also anyone who feels their finances are out of control or getting there should speak to a free government debt help organisation like the Citizens Advice Bureau!

    • Savvy Scot says:

      I second this comment… The CAB often have great contacts in financial institutions who can help! Asking the companies directly as a first step often goes a long way

  5. One of my fans asked if we had that in Canada but I’m guessing no although I’m not 100% sure. It’s interesting to learn how different countries deals with debt. I’ve had mates in Canada who had serious debt and contacted the lenders who worked with them or lowered interest rates but they are not obliged to from what I understand. Cheers Mr.CBB

    • It’s not that lenders are obliged to take a specific measure like lowering an interest rate but more that they are required by the FSA to work with borrowers who are willing to repay the debt and help them to do so. I think it falls under Treating Cutomers Fairly in the FSA guidelines.

  6. About 6 years ago (during the time I struggled with money) I missed quite a few credit card payments. In fact, I didn’t pay 3 or 4 of my credit cards for a full 10 months while I was trying to get my life in order.

    The great thing for me was that I was able to negotiate a settlement in full with many of these creditors and was able to get all of them knocked out in a relative short amount of time.

  7. Tackling Our Debt says:

    It makes complete sense for lenders to re-negotiate a repayment process on loans instead of waiting for individuals to completely default on their loans, and in some cases, end up declaring bankruptcy.

    From what I have learned in Canada, lenders here could care less. They would rather see a person declare bankruptcy and they they write off the amount the person owes them as bad debt, versus helping an individual re-negotiate and eventually pay off their loans.

  8. AverageJoe says:

    Great first line! It’s similar in the US…they can’t help you get OUT of trouble until you get INTO trouble.

  9. I don’t think lenders in Canada are nearly as helpful. When I had to debt consolidate, I found the companies rude and not willing to help me at all. In fact they basically were against me. I wish I could have negotiated with them.

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