Non-performing loans are perhaps every lender’s nightmare. Getting to a position where the person who asked you for a mortgage cannot pay is rather very unfortunate. So much so, every lender strives to have few or none cases of non-performing loans. From a person who has borrowed a loan, you also have to make sure you pay up as soon as possible to avoid attracting extra costs above your loan. And in this piece, we shall look into a few things you can do to avoid landing on a non-performing loan, so if you want to find out how, read on.
- Stick to your payment plan
Whenever you take up a loan, the lender will have a sit-down session with you so that you set a payment plan that can fit in with your loan. These plans are majorly set to be paid per month, but they could be set to bi-monthly, bi-annually, or even annually, depending on the quantity of the loan. As a borrower, you must then make sure that you do not skip any of these payments agreed upon in the beginning. In case you cannot pay up on time, contact the lender and discuss the way forward before you end up defaulting the loan.
- If you have extra, pay
Sometimes you could fall on some extra money, and this is the time you can make a double payment or, if you can, pay up the full loan. These additional amounts will then be carried forward unto the next premium and will come in handy when money becomes tight. Finances can sometimes be very unpredictable and so whenever you have extra, pay up the loan.
- Avoid last-minute rush
So that you do not end up rushing in search of money a month before reaching the pay-up date, consider early payments. Here you have a few options to choose from. One, you should consider making the loan a guarantor loan, such that in the case you are unable to pay, someone else can pick up this responsibility and pay it for you. And later, you can repay them. Secondly, you could create a plan with your employee such that whenever your paycheck comes in, a small amount is deducted from your salary and goes straight into paying the loan. That way, you will not be late in paying the credit, and you will finish paying up as soon as possible.
- Consider refinancing
Last but not least, you can always refinance your loan. Here you will have to take another loan to repay the debt that is approaching a non-performing one. This is a smart move so that you do not have your guarantor asking, ‘Can I remove myself as a guarantor?’ It will save both of you the hustle of running up and down and making phone calls looking for money to pay up. And even better yet, it will keep your credit record spick and span free from bad debts.
Well, if you are considering borrowing a loan in the near future, now you know how to reduce the risk of it turning to a non-performing loan.