Popular mistakes when repaying a loan
Many borrowers make several mistakes when repaying a loan, which can lead to negative consequences. Some of them may seem insignificant. However, paying attention to the loan repayment process can incur a number of financial costs for you. To avoid this, you must know what mistakes citizens make when repaying a loan.
Refusal to repay a loan
This may be the most stupid thing a borrower can do. It seems ridiculous, but in practice, there are enough cases when a person who takes a loan, faced with financial or personal problems, refuses to pay the debt.
It must be understood that whatever the reason for such behavior of the borrower, it will not justify his frivolous actions, at least in the eyes of the bank.
The motives for such careless behavior can differ, starting with the lack of money and ending with an attempt to deceive the bank. There are cases when a person has a whole set of loans taken from various banks behind him.
Ultimately, refusing to repay the loan will lead to a debt hole. Getting into it is easy, but getting out is much more difficult. Therefore, if you have problems repaying a loan, you must go to the bank first. Do not think the debt will be forgiven or saved by the declaration of insolvency. This, of course, will not happen. But, if you notify the bank, you can negotiate with the banking organization to change the loan agreement terms, which can help solve the problem. If this does not help, you must prepare for close communication with collectors and litigation.
Exclusion of debt repayment from the list of priorities
Many citizens, when planning their financial expenses, for some reason, believe that debt payment can be postponed. For example, it is more important for them to pay utility bills, buy clothes, save money for vacation, and not repay the loan. As a result, it turns out that when the loan payment deadline comes up, people have no money left or very little remains.
As a result, fines are imposed on the borrower for late repayment, and his credit history deteriorates, which will have to be restored. To avoid this, you need to plan your financial expenses properly. Paying off a loan should always be a priority. If you do not agree with this, you should initially think about the advisability of obtaining a loan.
Missed or delayed payment
Some borrowers believe that missing or delaying one payment is okay. As a rule, this error stems from incorrect prioritization. As in the previous case, the borrower receives a damaged credit history, debts, and fines. Even a slight delay on a loan can spell serious trouble.
Inattention when studying the terms of the loan agreement
A gross mistake is an inattention to the terms of the loan agreement. When you specify the terms of a loan, your attention is usually riveted on two points: the overpayment and the maturity of the debt. Keep studying the agreement only on this.
The contract contains a lot of other important information. In particular, you need to pay attention to the penalties for non-performance of the contract. The contract’s text may provide that a penalty may be charged from the first day of delay. If you take this moment lightly, you can put yourself in a difficult position immediately if you have problems paying the debt. Preventing such a mistake is easy; you must know your loan agreement thoroughly. Please note that some terms of the loan agreement may change without notice.
Priority in paying off large debts over small ones
This error is characteristic of responsible clients unfamiliar with credit relations. If you have several outstanding loans, you must pay off the smallest ones first and then the larger ones. Many borrowers conclude that it is better to pay off a large debt first, but this position is irrational. The fact is that large loans are usually secured by collateral; they are cheaper than small ones, which are provided without collateral.
Because of this, to reduce the financial burden, it is advisable to first pay for small loans since they are more expensive, and only then are those issued for a large amount. Thus, you must prioritize payment from expensive to cheap if you have several loans. In this simple way, you can reduce your own expenses.
Taking new loans to pay off old ones
It is not a new situation when someone takes a new loan to pay off an existing one. This happens, in the absence of an alternative, to find funds to close the debt. There is nothing left but to contact the bank again in the hope that it will provide money that can be used to pay off the original loan.
In this way, the borrower does not solve the problem but only plunges deeper into the debt hole because the new loan will cost more than the previous one. Taking large and expensive loans to pay off old ones is not a way out of the situation, but a dead end, which will be difficult.
Making a payment at the last moment
This is another common mistake made by borrowers in the loan repayment process. It boils down to the fact that a person deposits money on the last day of the due date or in the last hours. The terms of the agreement are not violated. However, a situation may occur in which funds will be transferred to the account only the next day. As a result, there is a delay in the loan.
And as you know, there are penalties for any delay. You need to pay a little earlier to avoid such an unpleasant situation. At least one day before the last day of the allotted time.
Lack of confidence in the full repayment of the loan
There are cases when the borrower repays the loan and does not check it; that is, he does not ensure the debt is fully repaid. Such carelessness, as mentioned above, can lead to negative consequences for him because interest will accumulate on the debt balance, and a commission will be charged for servicing the account.
To avoid such problems, you need to get a document from the bank confirming the absence of debt after repaying the loan. If you have it, you will protect yourself from the troubles of such a plan.
