If you find that you are unable to pay your personal loan (unsecured loan), the first thing you should do is approach your credit provider and let them know. They may suggest a few options available to you. Ideally, you want to speak to your credit provider BEFORE defaulting on a loan as this can damage your credit score.
Let's unpack why it is important to act before you miss a payment and what can happen if you miss a payment.
If you miss a payment or if your account has been handed over to a debt collector, this will be shown on your credit report and will likely result in a drop in your credit score. Your inability to repay your loan and maintain your part of the loan agreement will also very likely affect your ability to get credit in the future. This is why it's important to act before missing a payment.
If you don't pay your personal loan in South Africa, this is the debt collections process that should be followed:
If you're approaching your loan payment due date and feeling uneasy about meeting it, it's a good time to create a budget. This will give you a clear picture of where your money is going and help you identify areas where you can potentially cut back. It's easy to overlook how we're spending our funds, so tracking your income, expenses, and debt in a budget can bring everything into focus.
After creating your budget, explore ways to trim your expenses. Are there any subscriptions you can cancel or more affordable alternatives you can switch to? These are the important questions to consider when analyzing your budget and finding ways to save.
Download a FREE, customisable budget template here to help you fast-track this process.
You can't just 'get out of a loan that you can't pay', but there are two practical, realistic solutions you can look at:
You may want to consider applying for a debt consolidation loan as a potential solution if you're struggling to pay off your personal loan. A debt consolidation loan involves taking out a new loan to pay off all your existing debts, combining them into one single monthly payment. This can help simplify your finances and potentially lower your overall interest rates, making it easier for you to manage your debt.
Before applying for a debt consolidation loan, make sure to compare different lenders and loan offers to find the best option for your financial situation. Additionally, it's important to carefully review the terms and conditions of the loan to ensure that you understand the repayment terms and any associated fees.
Ultimately, a debt consolidation loan can be a useful tool in helping you regain control of your finances and make it easier for you to stay on top of your payments. However, it's important to remember that taking on additional debt should be done thoughtfully and with a clear plan for repayment in place.
Debt counselling, also known as debt review, is another option to consider if you are struggling to pay off your personal loan. Debt Counsellors are professionals who can help you develop a plan to manage your debt more effectively. They can negotiate with your credit providers on your behalf to potentially lower your interest rates your loans. This can end up saving you money in the long run.
Meerkat is dedicated to empowering South African consumers to make the most of their finances. Recognized as one of the top 10 leading debt counsellors in the nation, we are committed to providing expert financial guidance and support. Trust in Meerkat, a registered Debt Counsellor with NCRDC 2613, to help you navigate your financial journey with confidence and clarity.