How to extend the repayment of another loan or credit installment?
There are extremely difficult and demanding periods for our portfolio. Sudden situations in life may require large and unforeseen expenses. If we are in the process of paying off a financial liability, we are at risk of losing financial liquidity. What can we do to extend the repayment date of the next installment? There are several ways to get out of this situation unscathed.
A loan payment often consists of an interest payment and a payment to reduce the loan’s principal balance. The interest portion is recorded as an expense, while the principal portion is a reduction of a liability such as Loan Payable or Notes Payable.
Do not avoid cooperation with the bank
Some debtors immediately create black scenarios in their head, including bailiff and eviction. Relax, if we take the right action, it won’t be too bad. First of all, inform your bank or loan company as soon as possible about the more difficult situation. Striving for bailiff enforcement is not in the interest of creditors, for whom it is a waste of time and money. For this reason, the bank or loan company prefers to find a joint agreement that will be satisfactory for both parties.
Possible solution to the situation
The lender has the option of temporarily suspending the repayment of our liability. In this way, we will receive time that will allow us to regain financial liquidity. Moreover, a bank or loan company can opt for this step at no additional cost to give the customer the option of paying off the rest of the liability. Another way out is to extend the loan repayment date. In this way, the monthly installment will become significantly lower. This, of course, involves a higher total cost, but at least it allows you to continue paying the installments systematically.
Consequences of late payment
Certainly, the problem should not be underestimated and installments should not be delayed. In this way, loan companies and banks may charge a penalty interest rate. Their height may correspond to four times the pawnshop rate. As a result, we will only fuel a debt spiral that will be difficult to get out of. In a more difficult situation, talk to your lender as soon as possible to avoid this type of experience.