Signature loans are personal loans that are considered to be secured through trust, based on the borrower's financial status and credit history. Even though they are for relatively low amounts, signature loans are usually preferred over secured loans. But a signature loan can still be a big deal if they are late or go into default: they can damage an individual's credit score and lead to legal action. Here are a few options that you can take if you're late on a signature loan.
Contact the Lender
The first step you should always take is contacting your lender. Lenders understand that things happen -- they only worry if they don't hear from you and don't receive a payment from you. Contacting the lender will put the ball in their court and let them give you options. Often the lender may be able to do something such as change your payment due date, so you have an additional week or two to pay.
Consolidate the Loan
If you truly cannot afford your loan payments, you might want to consider consolidation. Loan consolidation can enable you to roll multiple signature loans into a single low interest loan. This is only a viable option if you have relatively good credit -- but if you do, it can save you a lot of money.
Rehabilitate the Loan
There are some creditors that offer something called "rehabilitation." A rehabilitation is very simple: you make your payments on time for a certain amount of time, and then it appears as though you were never late at all. Rehabilitation loans may require that you pay three months, six months, or even a year on time, but they're ultimately one of the better ways to avoid damaging your credit score.
Defer the Loan
Even though a late signature loan is damaging, it's not as damaging as a secured loan. With a secured loan you could lose access to property such as a house or a car. Nevertheless, you should take action very quickly when you're found to be late on a signature loan, as otherwise you could find yourself being taken to court.
When in doubt, communication is always key. Most lenders do have programs in place for those who aren't able to pay on time. They would much prefer to lose out on a single payment or two rather than the loan being defaulted on altogether. Remember that you can negotiate -- it just takes some time.Share