As they say, your friendly neighborhood 5-6 will always have a better memory than you do. With that, being petiks with your loan payments can surely give you a lot of stress!
These days, when COVID-19 left many Pinoys jobless and businesses closed, being closer to a loan default adds up to so much bad trip to many. Then there might be some medical emergencies and rising costs that can easily make you decide to put off your loan payments for the meantime. However, that is definitely not a good idea if you don’t want to get yourself in a much tighter spot!
So what really happens if you get tired of paying your loans?
Here are a few eye-openers to give you an idea:
You get more debt
My fingers and toes can’t count all the friends I know who, in one way or another, have encountered problems with debt—and I always end up telling them this:
Money taken from loans is money borrowed.
It’s as simple as that!
You need to pay off a portion of what you borrowed at a given due date to keep money moving for others who are also trying to get loans and so that lenders can also provide the same (I guess that’s just how the ‘circle of life and debt’ really goes).
>So when you don’t pay off the money you borrowed in due time, you will get higher interest rates and add more debt on your plate. And believe me, so many people are already so full they’d like to throw up!
Usual interest rates for late payments range from 7% to 10%, which can quickly turn into bigger amounts if you pass on payments. Worse, when your loans reach a default, you’ll be asked to pay for everything in full our overdue balance, plus interest, penalties, and other add-on charges. Fail to do that too and lenders will pass you off to collectors who can really cast some high-level stress and pressure on you until all you can say is… ‘di ko keri to besh!!! 😡😟😞
You lose what does not belong to you
Let’s get one thing straight about home and car loans. Unless you’ve paid the full price of a car or house from the bank or lender where you borrowed money from, that property isn’t really yours. If you fail to make your payments, lenders can easily take away your house or car even after you’ve already spent a big amount of money for them.
Let’s think about this for a second. Your car and house are two of the most important investments you’ll ever make in your lifetime and the worst things you or your family can lose because you decided to stop paying your loans.
So before entering into any loan agreement, carefully review the terms and conditions, then ask yourself this one important question:
Kaya ko ba bayaran itech?!
There will always be risks even in secured loans so study your contracts like your life depended on it (‘coz it might), before you sign that dotted-line.
Banks and lenders will always stick to a system that reviews delinquent loans or those that are not being paid, and then move forward to repossessing cars or foreclosing houses for public auction. When malas strikes and it’s too late, I’m sorry besh but you really can’t do anything to save your car or home.
You get a losing credit score
Most people would define the word ‘score’ as a number of points in a game or for Pinoys, the ability to get something for free (e.g. Pa-score naman nyang tsibog mo).
For the financial industries, ‘score’ is not related to any games or anything free at all!
Your credit score is what lenders look into first before deciding if your application is either havey or waley. Non-payment of loans simply equals to lower credit scores, which will eventually disqualify you from making any secured loans in the future.
If your loans reach a default, expect to get really bad credit scores that will also disqualify you of any financial assistance when you most need it.
Banks and lenders are required to report unpaid loans to the Credit Management Association of the Philippines (CMAP), which then computes credit scores and determines corresponding penalties that can forfeit you from applying for new loans for at least five years.
Now, if by some stroke of luck you do get approved while still having a bad rep on your pending loans with other banks covered by CMAP, you are also sure to get higher interest rates that may lead to even bigger debt
You get less benefits from the government
Government-owned and controlled corporations (GOCC) that provide loans like the Social Security System (SSS) or Government Service Insurance System (GSIS) are also strict with non-payments by deducting balances, penalties, and interests from your claimable benefits. These include your disability benefits and life insurance, as well as your retirement or maternity benefits, which means less help for you and your family during the most important times in your life.
On the other hand, keeping up with your payments for loans from GOCCs puts you in good standing and keeps your benefits safe and secured, while making you eligible for future financial help.
What do you do when you can’t pay?
It’s not true that banks and lenders don’t have any pity on problematic loans. For example, given the current pandemic situation, most of them have issued some kind of leniency in how they collect loan payments.
Recently, the Credit Information Corporation (CIC) issued a memo to banks that freezes loan defaults during the lockdown periods because consumers like us really have it tough these days.
However, if you find yourself still unable to pay even after the pandemic has been resolved and government leniency has been lifted, the best way to get out of your difficult situation is to let your bank know that you still exist.
All it takes is one call to your loan provider, show your willingness to settle your obligations, and ask for help as a solution to get you out of debt. Immediately taking action by still continuing with your payments in whatever capacity you can or by resorting to solutions such as refinanced or consolidated loans can make things easier for you through longer payment terms and much lower interest rates.
One reliable loan provider that can help you manage your IOUs and money matters better is Home Credit, which is a part of the globally established consumer finance expert Home Credit Group. This loan provider aims for financial inclusion, which means they are out to help even those who are struggling with their credit scores so they can stay afloat, improve their standing, and be able to apply for future loan assistance.