Loan Repayment: 5 Tips for Avoiding Late Payments

Due to certain difficult circumstances, a borrower may encounter difficulty paying the monthly installments of their personal loan despite the fact that it was contracted with hindsight of their finances. To avoid aggravating their situation, they should take certain steps quickly, because a late payment can have unfortunate consequences and even lead to penalties.

Late loan repayment: beware of the consequences

If the borrower is late paying the monthly installments of their loan, the lending agency has many recourses. If the monthly installments are not paid, the lending company will add fees to the amounts due. If the payment delay persists, the institution will charge interest at an annual rate of 20%. In the event of a formal notice, action, request, demand, and/or legal proceeding, the client will have to pay an additional amount equal to 20% of the principal due as damages.

Our tips for avoiding late payments

1 - Establish a provisional budget

To do this, collect the following documents:

  • Your last pay statements.

  • Your receipts, payment notices, or bills: water, electricity, landline and mobile phone, internet subscription, insurance, vehicle maintenance, and your current loan repayments.

  • Your last income and local tax assessments.

  • Your account statements for the last 12 months.

2 - Determine your income

With the help of the documents collected previously, determine your income:

  • Consult your current employment contract and your last few pay statements to determine the date and amount of your next salary.

  • Consult your entitlements to social benefits.

  • If you receive a pension, note its amount.

  • Finally, note any other income that may occur.

Once you calculate the total amount of your income, you must subtract all your expenses and establish your provisional budget including the repayment of your loan.

3 - Determine your expenses

The fixed and unavoidable expenses that must be paid at regular intervals:

  • Rent and related expenses

  • Mortgage repayment

  • Personal loan repayment

  • Water / Electricity / Gas

  • Telephone / Internet / Television

  • Home insurance

  • Car insurance

  • Health insurance

  • Childcare expenses

  • Taxes

Living expenses:

  • Food

  • Personal hygiene

  • Medical expenses

  • Gas/public transit expenses

  • Sports and cultural activities

Occasional or optional expenses:

  • Outings

  • Clothing

  • Furniture and household appliances

  • Vacations

  • Vehicle repair/maintenance expenses

4 - Analyze your provisional table

You must then analyze the provisional table in which you’ve calculated your income and expenses. If the balance is negative, you’ll need to be careful and reduce certain expenses to avoid paying your personal loan off late.

  • If your final balance is greater than $100

The amount of your income covers your expenses. Your budget situation is good.

  • If your balance is between $0 and $100

Your budget is balanced, but your wiggle room is low, and you may be able to further improve your budget by looking for where savings might be possible.

  • If your balance is lower than $0

You’re spending more money than you receive. Your budget is unbalanced and you’re accumulating debts. You must rebalance your budget, reduce certain expenses, or – if possible – increase your income.

5 - Negotiation as a last resort
To avoid the consequences of late payments and the implementation of measures by the lending institution, make sure to inform the company as soon as possible in the event of financial difficulties, especially as soon as the first payment delay occurs. That way, you’ll be likely to benefit from the assistance of one of your creditor’s advisors to solve the problem. With your advisor, you’ll surely be able to negotiate some adjustments to your loan contract for once your financial situation returns to normal