Some people who took online payday loans Illinois do not even ask the question: “what should I do if I cannot repay it?” It seems that this cannot happen. But everything happens in life, so you’d better understand in advance what can happen if you have a loan but there is no money.
Perhaps you are having unforeseen financial difficulties. You are ready to pay the balance of the debt in good faith and do not give up obligations, but right now you have no money and nowhere to take it. You will get money only in a few months. What can you do?
Mortgage borrowers by law have the right to temporarily reduce or stop loan payments if they are having a difficult life situation. For example, they lost their job or got sick for a long time.
If you find yourself in a difficult financial situation due to disease, you can apply for a loan vacation. This option is suitable for all types of loans and borrowings from banks, microfinance organizations, and credit consumer cooperatives.
Negotiate with the lender
The main rule: contact the lender right away, do not hide, do not wait for the debt to disappear.
Even if the collectors do not call you and do not get messages from the lender, this does not mean that they have forgotten about you and forgiven the debt. Interest accrues, the debt grows, credit history worsens.
In addition, many lenders specify in the contract that the borrower is obliged to immediately inform the lender that his or her financial situation has deteriorated so much that he or she will not be able to repay the loan on time. That is, if you do not pay and remain silent, you are breaking even more rules.
We cannot say that the lender is waiting with open arms for its insolvent clients and is ready to provide them with credit holidays on favorable terms, but it is possible and necessary to negotiate with the creditor.
What can you and the lender agree on?
- Deferred payment. One of the possible options is a credit vacation, a delay in payments for several months. The lender is not obliged to agree on a deferral, but if you have been a trustworthy client for many years, paid regularly, you have a good credit history, the lender understands the circumstances and sees that you are not a fraud, – perhaps they will meet you halfway. Remember that this delay will increase the next payments. And if during this time you do not improve the financial situation and start paying, most likely, the lender will not make concessions again.
- Debt restructuring. A reprieve is often denied. Then try to negotiate a debt restructuring – renegotiating a loan to reduce payments. Most often, the payment is reduced by increasing the loan term – for example, from 3 to 5 or from 5 to 7 years. But the lender will not stretch your two-year loan over 20 years.
There may be other options for changing the terms of the loan agreement – it all depends on the creditor. For example, you will be offered a grace period or reduced payments.
Find out when you will be able to pay the loan and explain it to the lender. To make a decision, it is important for a lender to understand when and where you will get money. If you plan that everything will work out in a couple of months and you can pay off the loan (you are waiting for a job offer or your treatment will end), tell your lender about it. But don’t try to embellish the prospects. The deception will quickly be revealed and the most important thing in relation to you from the lender – trust -will disappear.
How to negotiate with the lender?
Prepare for the conversation. Collect all documents that may be the basis for a delay or revision of loan terms. It is important to provide at least some documents confirming the difficulties you have encountered, and not just words that you have no money. For instance:
- a claim to the court and an application for the suspension of work if the employer delays wages;
- death certificate of the loan co-borrower (or a close relative who helped you pay off the loan);
- certificate of disability;
- an extract from the medical record, which confirms the emerging serious illness or the need for an expensive operation;
- documents of damage to property that was generating income – for example, a house that you rented out;
- child’s birth certificate.
Do not make promises if you are not sure about the possibility of loan repayment. If you agree on a deferral or preferential payments for a month, but nothing changes in a month and you will still have no money, the lender will no longer meet you halfway.
Should you get a new loan to pay off the old one?
In most cases, this is a bad decision. First of all, you already owe one lender, and your other loan application can be denied. Or it will be approved but with a higher interest rate. If you take new loans in a panic to pay off old ones, you can get bogged down in a hole in debt.
I got fired, I’m sick. Will the law protect me?
In the case of a mortgage, the law gives you the right to get a mortgage vacation. But you can use it only once during the period of the loan agreement, and its maximum duration is six months.
For other loans, the legislation does not provide for any indulgences even for the direst scenarios (loss of a breadwinner, disability). In such a situation, all the risks fall on you. The bank may make concessions, but it will not forgive your debt or the state will intercede for you. You will have to repay the loan in any case.
If the bank has lost its license, should I still repay the debt?
No, your debt does not disappear after the bankruptcy of the bank, it goes to a third party – another bank/organization. The debt will have to be paid, and it is important to keep your finger on the pulse: follow the news and do not stop paying the loan. New details for paying a debt to a bankrupt bank must appear on the FDIC’s website – pay according to them and, just in case, save all payment documents. If you stop paying but just waiting for an official notification of the transfer of debt and a change in details, then in the end you may receive not only a letter of notification but also an impressive penalty for late payments.
Will I be jailed for non-payment?
Criminal liability can only arise if you cheated when you took out a loan, or you have a large debt and have money to pay it off but ignore both the bank and the court.
You can be jailed if you concealed important information from the lender (for example, about the place of work, about your income) and at the same time were not going to pay.
If I still cannot repay the loan, what can I expect?
The bank has the right to demand money through the court, which will make a decision and fix the amount of the debt. At the same time, the court can take into account your difficult situation and appoint lenient conditions for repayment of the loan (for example, to repay the debt in parts). But you can agree with the bank on changing the terms of the loan. In the event of a trial, you will also incur legal costs (for example, the lender may include legal costs in the amount of recovery, and the court will take them into account). Your debt will increase.
It is likely that collectors will join the case before the trial, and they will call you and remind you of your debt. Do not be afraid of them, do not expect aggression or violence. Remember that collectors are required to act within the law. If the collector warns you that you will have to pay a fine for delay, this is legal. But if they threaten with physical violence, intimidates – immediately contact the police. This is illegal.
If you do not pay the debt even after the court decision, then wait for the bailiffs. They can foreclose bank accounts and the valuable property you own. In addition, if your debt is impressive, you will not be released abroad until you pay the debt off.
If you took out a secured loan, get ready for the loss of property. If you stop paying, the bank has the right to realize the pledge – that is, to sell the apartment at auction.
If you had a loan guarantor, then he or she is now responsible for your debt now. The lender has the right to demand from him/her to pay off the debt.
What if I declare myself bankrupt?
The most extreme measure is to declare yourself bankrupt. But this is not a magical way to write off debts and live peacefully without obligations. This is a harsh procedure in the event of a dead-end situation (the house burned down, all the property was already seized, it is impossible to work due to illness). To pay off debts, the bankrupt’s property will be put up for auction – including a mortgage apartment. If you declare yourself bankrupt, you need to understand that this may turn into a ban on leaving the country.
Calculate your strength. The advice may seem obvious, but in practice, people often do not pay off loans not because of crises in the country or problems in the global economy but because they incorrectly assess their capabilities and take on obligations that they then cannot fulfill.
The simplest (and most important) loan planning guidelines that both bank employees and common sense suggest:
- the amount of loan payments should not exceed 30% of your income, while the remaining funds should be enough for other obligatory payments and for your life and your family members;
- prepare a “safety cushion” – at least three of your monthly income. If force majeure happens, it will help you out at least for a while;
- do not neglect insurance. In case of disability, the insurance company will pay off (partially or completely) the debt to the bank.
Remember that the option “I took out a loan, did not repay it, and nothing will happen to me” does not exist. The debt will have to be paid: sooner or later, voluntarily or involuntarily.
How else can you simplify your life?
If the crisis situation has passed or it did not exist at all, this is not a reason to relax. Always try to simplify your conditions as much as possible. Here are a couple of tips on how to do it:
- Refinance your loan. Sometimes banks offer better loan offers with lower interest rates. You can take advantage of this and cut your loan costs. To do this, you need to refinance the loan, that is, take a loan from the same or any other bank with a lower interest rate (provided that there are such offers) in order to repay your current cash advance loan Illinois. But if already have a debt, such a move may not work;
- Consolidate loans. If you have several loans, you can “consolidate” them, that is, combine them into one. After that, you will pay one loan once a month instead of making payments in five different banks. Consolidating loans can be tricky if you already have delayed loans, but it is a good way to manage your obligations more conveniently.