How to take out a loan rationally and what to do if you can't pay off the outstanding one


After taking out a loan, some people do not ask themselves the question: "But what will I do if I will not be able to pay it?". It seems that such a thing cannot exist as a possibility when they take out a loan. But in life, anything is possible, and it would be better to know in advance what to do if you have taken out a loan but do not have enough money to pay it off. To avoid ending up in such situations, you need to choose the right loan for your needs.

Before taking a loan, I recommend that you analyze your needs as seriously as possible. Sometimes, when an emergency arises, it seems to you that the best solution is to take out a loan. Okay, someone who has already gone through loans feels more secure and knows what steps need to be taken to repay the loan on time and without delays.

Choose your credit product rationally.

First of all, analyze in detail your financial situation, stable monthly income, and expenses. Then study the credit products that suit your needs. Maybe with a short-term loan, you will solve your problem quickly, and you won't have to borrow for a long time. However, if the amount offered does not get you out of the deadlock, you can apply for a line of credit or credit card. Here the amounts are higher, but also the more extended credit period. Respectively, you will reimburse the money in percentages.

Choose the right lending company.

First of all, here you should compare the loan costs, namely the interest (be careful it can be daily, monthly and annual). Some companies also charge hidden fees such as credit administration fees or early repayment fees. Carefully read the pre-contractual terms of the loan before signing the actual contract. The lending company is obliged to indicate all the details in the agreement, including the provisions in case of late payment, several % of the penalty.

But what to do if you still end up with nothing to pay off the loan with?

I would recommend you to contact the lending company and explain your situation in detail. You can apply for an extension of the loan term or a reduction in the late payment penalty. If you have been a responsible customer, then you will be given some facilities.

What I do not recommend is to take another loan to repay the existing one. Panic can cause you to take impulsive action, and taking out a new loan to pay off the old one can lead to you getting stuck in a debt hole. You can try the given option, only if it is refinancing at a lower interest rate.