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What to do if you can’t repay your personal loan

No one plans to fall behind on their personal loan repayments, but sometimes life can get in the way. You might have to fork out for urgent dental work, or maybe you received a speeding fine in the mail..

Bessie Hassan

No one plans to fall behind on their personal loan repayments, but sometimes life can get in the way. You might have to fork out for urgent dental work, or maybe you received a speeding fine in the mail..

When you’re financially stretched, keeping up with your repayments isn’t always possible.

If you’ve started to fall behind, here are some tips for getting back on track. 

Don’t stick your head in the sand

The longer you let your bills pile up, the worse your problem will become. Be honest with yourself about your financial situation – this is the best way to start turning things around.

Start by creating a list of all your upcoming repayments. This can include everything from your credit card and mortgage payments to school fees or rent. From here, you can prioritise the most important payments.

Immediately cancel anything that isn’t essential, like your gym membership or Netflix. If you’re paying a bit extra into your mortgage each month, lower all your repayments to the minimum amount if possible. This can help free up some extra cash.

Speak to your lender

Lenders have specialist teams who are trained to deal with financial hardship. They can work with you to come up with a manageable repayment plan and prevent things from getting out of hand. They might do this by delaying your next few direct debits or extending your repayments over a longer period of time.

Be honest with your lender about why you’re falling behind. Having to fork out for a one-off occurrence like car engine repairs is going to require a different course of action to losing your job.

Take up a side hustle

It doesn’t hurt to drum up a bit of extra cash where possible. Almost one in five  Aussies are turning to the share economy to make some extra money on the side. If possible, become an Uber driver for one or two nights per week, sign up to Airtasker and offer your services as a removalist, gardener, dog walker, pool cleaner – anything you can think of.

It can also be worth having a hunt around the house for anything you could sell online, like an old couch or TV. You’ll be surprised by how much cash you can come up with from selling second-hand items.

Seek professional help

If you feel like you’re in over your head, speak to an expert in debt management. These people are specially trained to understand debt and can help you come up with a solution and create preventive strategies for the future. You often won’t be charged a fee to speak to a credit counsellor, but make sure you read the fine print first. Some places may try and rope you into a costly payment plan.

Credit counsellors can also offer tips and suggestions for improving your credit score or building your credit report for the future.

Defaulting on a loan is never fun, but as long as you face up to the situation and take action straight away, it doesn’t have to spell disaster.

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