What to Do If You Can’t Pay Back Your Loan

personal financeIn life, there are so many ups and downs and life is getting expensive day by day, numerous people can hardly manage their monthly bills. It’s a common thing in life even for those people with a stable financial base to experience some financial struggles.

The solution out of such a battle is always seeking financial assistance from the industries that lend out loans. But what happens when you borrow the loan, and you can’t manage to pay it back in time as per the agreement?

If you’re unable to pay back a loan the worst mistake you can do is to sit back and ignore the problem. You need not panic; neither should you struggle in silence. If you secured more than one loan and you have defaulted the payment requirements because of financial constraints, you need to act promptly.
The remedy to such a problem is straightforward. For instance, if you can withstand the expenses for your car, you can choose to do without a car or go for a less demanding vehicle that you can afford its costs without draining your pockets.

If You Fail to Pay Back

Payday loans accrue very high fees and interest rates, in case you are unable to pay back the loan within the required timeline. If you are unable and stuck to repay your payday loan, don’t give up yet! There is still hope for you. There are many advantageous options you can reconsider to salvage your future financial needs.

Taking action before the problem grows out of hand, saves you from landing in the following consequences that occur if you can’t pay your loan:

• Your credit score will increase unexpectedly
• You can be sued in a court of law
• You will pay extra interest and penalty fees

Even with the above consequences, you can still wash your name and create a clean credit history and have access to another loan within a brief period.

Thanks to the abolishment of the debtors’ prisons law in the United States because no debt collectors or threats from the police will be sent to your home. However, you must adhere to the legal requirements and documentation and avail yourself in a court of law. This is always the worst part.

I know it’s devastating, stressful and full of frustrations but you can walk out if it successfully. Appearing before a civil court does not mean you will automatically face the full force of law such as being imprisoned. No, you can avoid it easily.

Steps to Take The Moment You Notice You Can’t Pay

There is that grace period before the next payment of your payday loan is due. That means there is room for you to act before the deadline date of paying back. In case of such a scenario, follow the below steps:

1. Pay late: The loan lending industries require you to pay back the borrowed money on time. But if you can’t pay within the expected time, you can still do it later. You can make the payment 30 days after the due date. The advantage is that such late payments are rarely reported to the credit bureaus, and your credit score will remain safe.

2. Refinance or consolidate: You may go for a toxic loan scheme such as the payday loans and credit cards and consolidate them with a personal loan you secured from somewhere else. The idea of consolidating your loans helps lower the payment requirements, reduce the interest rates and increases your time to pay back the loan.

When you apply for these different loans, it enables you to have money to pay for the current loan, hence qualifying for a new loan with exciting packages. Money lenders don’t embrace borrowers who default or delay the payments.

Within your community, there are credit unions and banks that provide financial assistance to the people from within their locality. You can apply for unsecured loans from such institutions or from any online lenders you know. Such loans are recommended to help you not to tarnish your credit score for a better tomorrow.

3. Go for secured loans: For those who want to pledge their assets as collateral, you can consolidate secured loans for quick approval. The drawback of this technique is that you risk losing your assets like houses and cars if you default to pay your new loan.

4. Talk to the lenders: Reach out to your lenders as soon as possible you notice having difficulties paying them back. You might be surprised at the convenient options they give you like extending your due date, bargain a settlement or being allowed to skip for some months.

Elaborate to them that you have financial disabilities at the moment and so they should offer you less than you owe to see if they accept your plea. Although it’s difficult for your lenders to agree, it’s good to give it a try for a better option.

5. Prioritize your payments: You might decide to pay off more demanding loans such as the auto loans and asset loans and pay the unsecured loans like credit cards and personal loans at a later date if need be. Having a damaged credit score is not as detrimental as being evicted from your home or getting your car repossessed. Your life must not be disrupted, so make a tough decision and prioritize your loan payments that won’t affect your family safety and health.

Federal Student Loans

The federal government offers higher education loans that are supported by many benefits that are rarely found anywhere else.

The convenient options available with this loan program include:

  • Deferment: the delay is applied during the times of unemployment or severe financial battles. If allowed, it can help you have more time to plan on how to pay back the loans without much pressure.
  • Income-related repayment: income-based repayment programs are meant to make loan payments to be more affordable. It’s offered as per your income level; if you earn very little, you’re allowed meager pay to offload you the burden.

Payday Loans

Payday loans are exclusive due to high-interest cost they charge. You can easily be subjected in a debt spiral and be unable to settle your payments.
The only option if you can’t pay back your payday loans is to consolidate them. You can transfer the data to a cheap blender or move it using credit card balances as long as you put in mind the transfer fees incurred.

You can even stop payment on a check that’s already written, so that attends to higher-priority payment loans. This is risky as it can throw you in legal trouble. So you must seek the help of a legal adviser who knows the laws of your state pertaining the issue before you proceed to halt the payment.

Credit Cards

Your credit card issuer can quickly raise the interest rate to a higher level if you stop making payments. Therefore it is prudent to prioritize the type of fees to start settling fast to avoid the consequences of not paying back your loan.

Get Help

At such a difficult financial time, don’t isolate yourself but instead seek help from the following:

  • Credit counseling: Look for a professional counselor who is not after selling something to you. The counselor can help generate a plan to help you manage your debts. You can contact agencies like the National Foundation for Credit Counseling (NFCC) and enquire the requirements of a reputable counselor.
  • Bankruptcy: Although you might be asked to fill the bankruptcy form, it can help give a solution to your financial problems.
  • Public assistance: The federal government and local utilities provide help to citizens who are unable to pay their bills. Begin searching with the USA.gov to get programs that will advise you how to stay safe with your loan payments.


We’ve tackled all the short-term fixes and now let’s finish with the long-term plans to ease you the burden of loan payments.

Emergency fund: save regularly for your emergency needs. You must be able to spend less than your income for you to build a successful emergency fund that will help you settle bills without necessarily going for loans.

Understand your income: Have a track record of all your expenses and your net income. This might help you notice where you squander too much cash that you would rather save.

The best solution is to cut on unnecessary expenses, sell commodities you don’t use, and doing extra jobs. For an excellent long-term plan, prioritize your spending habits and concentrate on your current profession/job.

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