For some people, the same financial challenge that forced them to find quick loans to sort out their problem also caused them to default on the repayment of their loan. While for others, it is simply a case of financial indiscipline. Either way, a lot of people are in serious financial debt and are been chased around by lenders. If you are reading this, then there is a good chance you are one of such people. Below are a few pointers on how you can dig yourself out of a dire financial debt situation;
In the more developed parts of the world, borrowers often have options to renegotiate on their loans and possibly seek an extension. In Nigeria, this is not often obtainable but there are a few lenders who will be willing to renegotiate your loan tenure with you. They could help extend the repayment date, allowing you enough time to put yourself together. Have a conversation with your lender(s) and find out if they can allow you to pay at a later date.
- Make a commitment:
When you default on your loan facility for a period of time, your lender is permitted to report your details (BVN, name etc) to the Credit Bureau of Nigeria; the agency saddled with the responsibility of assigning a credit score to each individual based on their previous repayment behaviours. Reporting your details to Credit Bureau will cause you to have a low credit score thereby preventing you from accessing higher loans in the future. What should you do? Make a commitment! Lenders biggest issues are borrowers who refuse to make any commitment at all. Discipline yourself to make weekly, if not daily, commitment. You could decide to pay #1,000 daily or #5,000 weekly, either way, keep paying something on regular basis. This has a two-fold advantage; it is likely to prevent your lender from reporting you to Credit Bureau and at the same time help to reduce your debt size.
- Discipline yourself:
Although some people unfortunately find themselves in difficult situations, e.g. loss of a job, many people default on their payment and incur huge debts due to a lack of financial discipline. As a borrower, if you can learn to discipline yourself, cut down on your spending, and make a commitment to stop the embarrassing calls and text, you will definitely bring yourself out of the debt pit.
- Resist the urge to borrow from Peter to pay Paul:
This is a strategy that some people often use, collecting loan from one company to pay for another loan that is due, so as not to default. In some cases this works and in the end the lender is able to buy time and eventually pay off his/her debt without being called a defaulter. But if this strategy is not intelligently applied, you will end up with such a huge debt your finances will be in ruins.
This how it works. When you loan 10,000 from Company A, at 30% interest, which means you have to pay back 13,000 after 30 days (or at whatever tenure you choose). If you decide to loan money from Company B to pay off this loan at the end of the loan tenure, you will have to loan 13,000 (cost+interest). Company B will also add their 30% interest, which means you will have to pay them at the end of the second loan 16,000. Imagine doing this over and over again. The debt will keep climbing at the end of each tenure, and in the end, you will be buried in debt.
If you do not have a concrete plan to repay, such as, expecting a huge sum of money at a particular date in the future which will help you clear off this debt, then it is not advisable you employ this strategy.