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.