Avoiding Defaults on Your Loans

 If you are in default on any one of your loans, this can potentially lead to you having a black mark against your name, in regards to your credit history. This mark, or negative listing, can stay on your credit history for up to 7 years and can significantly limit your financial options. A poor credit history can affect your application for a credit card, home loan, car finance, cash loan, or any form of credit through banks. It is therefore sensible to look after your credit health and avoid defaults on your loans.

What is a Default?

A loan default means that you haven’t met your legal obligations of acontract to repay a loan. A default occurs when you have missed a payment, are late with a payment, or haven’t made any payments.

A default shouldn’t be confused with:

  • Insolvency, which means a debtor cannot pay their debts.
  • Bankruptcy, which involves legal intervention in the finances of those who are insolvent or in default.

Avoid a Default

This is really a no-brainer. Make your loan repayments on time, all the time,until the loan is paid in full – it’s that simple. But sometimes, this is easier said than done, because as we all know, life happens. The unexpected occurs, emergencies arise and disasters hit – and the funds we allocated for one purpose are now suddenly neededfor another. In these instances, quick cash loans can provide financial support to cover the cost of an unexpected emergency, without impinging on your budget and financial obligations.

Causes of a Default

Researchers have actually identified certain factors that make people more at risk of defaulting on loans and other credit. These include single households, unemployment, aged under 50 years, elderly, lack of social support, and even internet illiteracy,because these households may be less likely to find support services and benefits available to them.

Be Pro-Active

If you find you’re struggling to make a payment, don’t just sit there and panic, because that will not help you, in fact, it’s likely to hurt you if you end up with stomach ulcers from stress. Talk to your lender, explain your circumstances and negotiate. Ask for a reduction of your debt or if they can alter payments to make them easier for you to meet. Lenders would much rather you paid them less money over a longer period of time than nothing at all.

Take Responsibility

Here are a couple of the responsibilities you should take to avoid defaulting on your loans:

  • Write up a budgetand stick to it – Ensure that appropriate funds for living necessities and debt repayments are allocated.
  • Don’t take on more debt than you can manage – Live within your means and don’t fall into the trap of keeping up with the Joneses. The Joneses are trying to keep up with the Smiths and they’re all in debt up to their eyeballs, so stop wanting what other people have when they can’t really afford it either. If you can’t afford it, learn to live without it.