What Happens If I Stop Making Payments On An Installment Loan?
You can run into big problems if you don’t back what you owe on an installment loan. Most personal loans are designed to be used for a short amount of time. Consumers often turn to these loans when they need a quick cash injection quickly. Most tend to come with extremely high APRs and unfavorable terms. Meaning, you’re on the hook for several times what you borrowed over the course of a year. Rates and fees will vary, but they can be upwards of 100%. The benefit of this type of loan however is shown in how often they’re provided. That it allows you to get the money very quickly and easily when you need it. Direct installment loans typically have very simple underwriting terms. You can get cash even if you have a poor credit score. Typically someone would find it easy to get cash at the same time instead of skipping the monthly installment loan payment. Money can usually be deposited into your bank in the space of a couple of minutes. Compare that time frame to a few days or weeks with a bank or large mortgage lender.
The best way to use an installment loan is for an emergency expense. Target a quick way to get a cash injection when you need one urgently and can’t afford to wait. For instance, consider a direct lender for installment loans if you need to make rent. You can use a direct loan to provide just enough cash to tide yourself over until payday. Most people attribute a cash advance to where the name comes from. While 200% might sound like a huge APR and we agree it is really high! It’s not bad if you’re only borrowing $100 over a couple of weeks. Borrowers in this situation can expect to pay back around $15 with no prepayment penalty for most direct installment loans.
I can’t make the payments on my installment loans
When you take out any loan, you are making an agreement with the direct payday lender. Per the contract, you agree to make on-time payments each month on the due date. Usually, this involves setting a date for the repayment in full. Which allows you to agree on the fees and costs associated with the loan. Because payday loans are small, you will do this in one amount. What happens if you miss your repayment and a collection agency starts calling you? It will depend on the small print in your loan agreement.
Very often, there will be no penalty for missing repayments. Other than the fact that you will then be taking longer to pay back the loan. For partial repayment, you will continue to pay APR on either the remaining installment loan amount. Or you can decide to pay the full amount, depending on the nature of your loan. You might also have to pay a fee in some cases. Most online cash advance companies and car title lenders will give you late payment charges. Often this will be added to your total loan amount. Thus it is very possible that the overall amount you end up paying can continue to climb with each missed deadline. This will also damage your credit rating, making it harder for you to qualify with direct installment lenders in the future. It is important when choosing direct lenders online to compare not only their rates but also their terms. Interest rates on cash advances are going to be high, but you can’t expect a rate of what you see on student loans or government back mortgages. What’s also important to remember is why you applied for online financing, to begin with. Keep in mind how much you pay when choosing direct lenders online. You can choose the company and length of payment to be collected. In some cases, debits will be made on your account repeatedly. The maximum amount of money can be withdrawn leaving you with zero cash flow.
What if you really can’t make your installment loan payments?
If this continues you need to consider the lasting consequences. Is it looking increasingly unlikely that you will ever be able to satisfy the full amount? What can you do to get out of spiraling debt and get the creditors off your back? There are a few options to consider if you have a past due direct lender installment loan. One is to discuss debt restructuring with the direct installment lenders. By doing this you may see the interest is frozen. Sometimes you can reschedule the online payment amounts for a later day that fits in your schedule. You can consider bundling your finance payments into one amount. Search out and compare legitimate direct installment loan lenders. We know many borrowers who did this and made it easy to finish paying the loan.
You might also consider a personal loan or payday loan consolidation. Which involves taking out a single large installment loan in order to pay off your smaller loans. A bank loan for example can take care of your personal loan and should have better rates. Your final option is to declare bankruptcy, which will usually write off or significantly reduce debt owed to a direct installment loan company. This can hurt your credit score but is no longer as serious a black mark as it once was. Ultimately a bankruptcy will allow you to formally address your credit concerns and you can move on to start fresh.
Tim has been working in the personal financing industry for well over a decade. Before that he managed his own team of mortgage professionals at a top lender in California. Now that Tim is firmly entrenched in the online lending industry he’s looking to share his industry expertise and experience.