Failure to repay your loan or credit amount is severe — leaving unpaid debt untouched can result in late collection fees and additional interest. You may even find certain things you own repossessed, depending on what you agreed upon when you signed for a loan or credit amount.
So what can you do to get out of this repayment mess?
Firstly, is it a default or a missed payment?
This matters a lot.
Missed payments can be reversed (sometimes) by speaking with your credit provider — they may even be kind enough to take it off your credit history.
On the other hand, defaults happen when you don't pay back your overdue amount for more than thirty days. You may have several missed payments by this time without knowing. Defaults are harder to reverse and may get passed over to a debt collection agency. You'll then be paying the debt collection agency instead of your credit provider. The agency may even add transfer fees for taking on your debt.
Shouldn't I have recieved a letter first?
Legally, your credit provider will have to send you a notification about your default before they charge you for late fees or declare a missed payment as a default. If they haven't done this, you could have a reason to get your default reversed — but only in this one instance. For example, if the letter gets sent to another address, you can still be fined because lenders expect you to inform them if you move or change your address.
How Yonda can help.
If you're on the Yonda app already, you may have noticed it includes a lot of alerts. This is all designed to help you avoid defaulting by reminding you when you've missed a payment and how long a payment has been missing.
Anything else I need to know?
Did you agree on anything you own being used as security when you signed up for a loan or credit amount?
Security is something you agree to have sold on your behalf if you can't meet repayments. Like defaults, you'll have to be legally notified first before this happens. But once that's out of the way, your stuff may be up for repossession.
It's a scary thought, but that's why it pays to be sure about what you're signing on.
Repossession can only happen on the items you agree on when you signed for your loan and excludes essentials, such as heating. Once items are sold, your account will be frozen — so no more interest payments or fees are added. Your remaining debt may be passed to a collection agency at this point if you're not with one already.
Can I sell stuff after my loan agreement has been signed?
You can request a valuation after signing a loan agreement, too, if suddenly you're unable to meet repayments. Whether you're accepted or not will depend on who you lend with and if they think what you have submitted for repossession is valuable or not.
What can I do about my overdue repayments?
Now you're keyed upon terms and agreements; there are a few things you can do to scale back your existing debt;
Pay missed payments.
You can usually contact your credit provider to sort out an alternative payment arrangement by emailing or calling them. Talk to them to work out what you can afford and over how long.
If you're really under pressure, you may want to think about applying for hardship. However, this isn't a permanent solution and may end up costing more in the long run. But it does put a temporary hold on your account if you're suddenly unable to meet repayments. To get accepted for the hardship, you need to be facing a genuine emergency, such as loss of income or severe illness.
You might also want to think about debt consolidation. This is a big topic, and we cover it in detail in another blog. In short, though, it means bringing all your debts together into one lump sum to pay off on a single card and at a single rate of interest.
Sort out defaults.
Once you've defaulted on a payment, your credit provider may shift you to a debt collection agency. In some cases, you can make a case for moving your debt back to your provider, but it's up to them to decide.
What about debt collectors?
Your credit provider authorises debt collectors to track you down and find out why you've missed payments. Your provider may do this after attempting to contact you.
How do I go about making repayments?
You can talk to your provider or debt collectors about a repayment plan, apply for hardship or consolidate your existing debt.
You'll also be adding fees to the original amount. There are rules around these fees to protect you, outlined in the Credit Contracts and Consumer Finance Act (CCCFA). You can query the rules if you've reason to think that;
- Daily amounts are more than 0.8% of the total unpaid balance.
- If the information given to you is unclear or you weren't informed of the added fee.
- The amount you charge is unfair (fees should only cover the lender's loss amount and shouldn't make an additional profit).
- Unfair treatment or incorrect information.
All repayment cases are considered by the Commerce Commission, which makes its decision based on individual circumstances.
You can do things to sort your repayment amount, like consolidating debt, which may make it smaller. The main takeaway is to contact your provider or debt collector to sort a new payment plan. That way, you can reduce the interest and fees you will pay.