If you struggle to make loan payments, you’re not alone. A recent survey found that over a third of Canadians say they have too much debt, and 53 per cent of them struggle to pay bills.
If you come up short one month because you had some extra bills or unexpected expenses, keeping up with regular payments on loans or credit cards can feel overwhelming. However, just because you’re running low on funds, doesn’t mean you’re out of options.
Here’s how to prepare for a candid discussion with your bank or lender so you can lower your stress and get back on track.
The faster you act, the better
Whether you’re the type to tackle challenges head-on or you prefer to avoid tough conversations, acting quickly can make life easier. If you think you might miss a payment, the best and least stressful way to manage your situation can be an open and honest discussion with your lender. Tell them that you want to solve the problem and are open to solutions. Being proactive can make a difference and can mean:
- You could avoid late payment fees.
- Your credit score probably won’t be impacted.
- A debt collection agency doesn’t have to get involved.
- You could prevent your wages from being seized by the lender.
Your lender probably wants to help
Friends might advise you to keep quiet if you’ve lost your job or simply can’t make your loan payments for any other reason. However, a better first step can be to talk to your lender.
Explain your situation to them and don’t be afraid to ask for help. It is more than likely they will understand and suggest other ways that can help you pay back the loan. For example, they could simply extend the current length of your loan so the payments are more in line with your budget. While it may take longer to pay it off, you’ll be able to better manage the payments. Let's look at an example of a $5,000 loan paid back in 36 months versus 84 months
Loan Amount: $5,000
Interest Rate: 29.99%
Loan Length & Monthly Payment
- 36 months = $212.23
- 84 months = $142.93
A longer loan term lowers the monthly payment by $69.30.
A checklist for your money talk
Before you make the call to your lender to discuss your options, gather some basic information for the chat. Here’s a list of important details to have ready:
- The reason why you are struggling to make your loan payments (such as illness, a job layoff, a sick child or an accident).
- Your employment situation and household income.
- How much you can (realistically) afford to pay monthly on the loan.
- How soon you think you can start making payments again.
- Details of other expenses (mortgage/rent, utilities, other loans, etc.)
Why bankruptcy should be a last resort
Declaring bankruptcy is a decision with long-term consequences. You can indeed eliminate your current debts by doing that but there are strings attached. There will be a significant impact on your credit score and it will be a long time before you qualify for credit again.
Working with your lender to find another solution could mean:
- You keep your assets.
- You keep your credit cards.
- You will avoid causing long-term damage to your credit score.
How easyfinancial can help
At easyfinancial, we understand that life can throw you a curveball at any moment. We work closely with our customers to help them get back on track and pay off their loans.
One solution to overwhelming debt can be a debt consolidation loan: it effectively pays off all your debts and turns them into one loan with a fixed monthly payment amount. With loan terms of up to 84 months you can tailor your loan payments to fit your budget.
Whether you are struggling to manage your current loan, or wondering if the time is right to consolidate debt, at easyfinancial we are here to help you get the financial relief you need while getting your finances back on track.
Talk to us if you are looking for some financial relief, have questions about managing debt in the face of inflation, or would like to adjust your current loan. Visit one of our 400 branches, call us at 1-888-502-3279, or apply online for loans up to $75,000.
Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.