Many canâ€™t afford to fulfill their dreams of a better future due to unstable financial conditions that is when they borrow money from financial institutions or the government. The borrowed amount is to be repaid, in monthly installments, after a certain time period with an added rate of interest. However, many fail to repay the borrowed sum due to a shaky economic situation.
This mostly happens to those who take student loans. The loan amount is to be repaid on completion of the college degree. Students take these loans thinking that they can repay it on getting a good job. This idea comes to an end once they step into the real, ruthless world where well paying jobs are hard to find.
On not paying an installment, the lenders send the borrowers a reminder. If the reminder is ignored they add a late payment fee and send them a notification. If that is ignored as well and the borrowers do not make a payment within the a grace period of 320 days or 10 months, the loan automatically goes into default and crosses the repayment status. The loan then has to be paid in full with added charges.
There are ways of getting out of default by opting for loan rehabilitation or consolidation. Defaulted loan consolidation extends the period of repayment and reduces the monthly installments. After your loan is out of default, your credit records are cleared and you can later apply for other loans. After getting your loan out of default it is advisable to opt for an income based repayment plan. In an income based repayment plan you can repay your loan as per your income and not the original loan amount. This plan makes it a lot easier for people who get a meager salary, to repay their loans.
Opting for consolidation in the grace period is advisable to avoid loan default. Another way of getting out of default is loan rehabilitation. In this plan you have to make nine regular payments to get your loan out of default and back to the repayment status. However, if you miss even one of those payments you have to start the process all over again.
Opting for these methods is much better than having debt collectors harassing you day and night. Opting for these methods is also better than having to settle your loans at an amount fixed by the lenders and borrowers which is still steep.