Some people are lucky enough to win the lottery and achieve financial success overnight. But, hundreds of thousands of people—if not millions around the world; run into loan defaults at some point in their lives. Financial success is not attained by sheer luck. In fact, it is the opposite. Any finance guru would tell you that patience and hard work are vital in avoiding financial failures.
If you have loan defaults right now, here are four potential reasons you shouldn’t ignore:
You overlooked the interests and fees
The higher your interests, the bigger your monthly payment will be. But, if you expected to pay off your loans without any effort—the probability of missing your payment is very high.
Let’s say, you have the same salary, but this time—your expenses are higher because of your loan repayment. If you’re not making simple lifestyle adjustment, getting an extra job or doing something to increase your income and lessen your expenses, you may not have the money to pay off your loan. And, it’s not a good thing because you will incur fees and charges, not to mention the additional interest rate that the credit provider may charge you.
Remember when you applied for a loan? You probably spent hours talking about the loan costs and almost everything with regards to repayment and felt so lucky that you got the loan you wanted. So, what exactly happened? Over the weeks, life and commitments probably got in the way of your budget, instead of being aligned into it and you lost sight of what was once a significant financial obligation. You stopped being committed to your financial commitments and probably saw the loan as one of the bills you normally pay each month.
You forgot how resourceful you are
Time changes people’s perspectives—but we’re still the same. Our resourcefulness, creativity and ingenuity remain, despite the financial hurdles that life throws at us. No-you may not be the same person you used to be, but it’s important to remember the characteristics that made you into what you are today.
There are solutions to every problem we encounter. Perhaps all you need is a bit of creativity, a budgeting strategy or a second mortgage from NSW Mortgage Corp to make it through. Resourcefulness will help you pay off your defaults, remove them from your credit file and establish a good credit score with the resources you have. It helps you do more with less money on hand.
Try to find value in the problem itself and treat it as a good learning experience that will help you face more difficult situations in the future. Look for substance not only in people but in experiences and events, beyond what expensive items and luxurious vacations can give you.
If it requires you to think outside of the box, explore alternative loan options you never tried before or innovative money management solutions to push yourself to do what others can’t, so what? This is how great people made it through. And, you’re no lesser than them.
You didn’t address the cause of debts and missed payments for too long
How severe is your default? Sometimes, missing repayments is a crisis in itself—because you can lose the collateral on secured loans-like your house, car, and other important assets. At times it is just a symptom of simple problem-like nonpayment because of time mismanagement, inconvenience, and simple financial setback that can be solved easily.
Oftentimes, you can resolve similar issues by asking yourself about the nature of the problem and the appropriate solutions that can work with the given circumstances. For example, do you need to automate payments, or do you need to get a debt consolidation loan to pay off all your current bills and loan default? These are two different solutions to your problems, but they have the same purpose. Choose the one which will work best in your situation.
When finding a solution to the problem, don’t panic and never give in to the pressure of giving up.
Look into the real cause of your debts, and why you can’t keep up with your payments. Don’t let the pressure from creditors cloud your thinking. If possible, request a copy of your credit report and gather all your receipts for the past three months and trace back where you went wrong. This way, you will have a clearer picture of your real situation and the trouble areas in your finances that you need to address.
You took out the wrong loan
Credit card debts, consumer debts and payday loans cost more than second mortgage or home equity loans. If you keep on relying on high-interest credits, and you missed payments several times—then you may want to consider getting a second mortgage. You can consolidate all your debts and take care of only one loan at a time.
For more information on how second mortgages can help you pay not only the defaults but your other existing debts, contact our in-house mortgage expert by making an enquiry today.