Financial problems can come up quickly, unexpectedly and often through no fault of our own. With the cost-of-living continuing to take its toll, the number of people finding it difficult to repay their loans is increasing.

When a rough financial situation hits, people feel overwhelmed and uncertain about how they are going to meet their next repayment. If you find yourself in a situation where you can no longer afford to repay a loan, there are options which can help you.

Where do I start?

1. Review your finances

The first step in addressing your ability to repay a loan is to review your current financial situation. Look at your income, expenses, debts, assets, and other financial obligations to gain a clear understanding of your current financial position. You can use spreadsheet or budget template to record this, which will be helpful to refer to in the future. From this step you should have a clear picture of your current expenditure. You will then be able to identify the root cause of the repayment difficulty which may launch potential solutions.

2. Talk to your lending provider/broker

Open and honest communication with your lender is key when experiencing difficulty making repayments. Contact your lender or broker as soon as you can and explain your situation and discuss available options. Many lenders will offer hardship assistance programs. These programs may include options such as loan modifications, temporary payment arrangements, or refinancing. Whatever option is recommended for you will be tailored to your specific circumstances.

2. Refinancing & Consolidation

Refinancing may be a solution to reduce your monthly loan payments or secure more favourable loan terms. A mortgage broker will be the best person to help you with this. They will assess your refinancing options, including accessing lower interest rates, extending the loan term, or consolidating debts into a more manageable structure. By leveraging their expertise and network of lenders, mortgage brokers negotiate on your behalf to secure the best possible refinancing deal. It is important to note that, in most cases, you do not have to pay for the services of a Mortgage Broker. This will be done by your lender upon approval of the loan.

If you’re struggling to repay multiple debts, consolidating them into a single loan with lower interest rates can simplify your finances and reduce your overall debt burden. A broker will be able to help you explore debt consolidation options and assist in securing a consolidation loan that aligns with your financial goals and repayment capabilities.

5. Seek Professional Financial Advice

Navigating complex financial situations requires expert guidance and advice. A financial advisor can serve as a valuable resource by providing personalised guidance tailored to your specific circumstances. Whether it’s developing a budget, exploring debt restructuring options, or negotiating with lenders, a financial advisor can offer insights and strategies to help you regain control of your finances.

6. Avoid Predatory Lending Practices

When people are struggling with their finances, they may become vulnerable to predatory lending practices, often referred to as ‘Payday Loans’, that promise quick payment. While these loans can seem appealing they often worsen financial problems in the long run as they have high interest rates and fees attached. It’s essential to exercise caution and seek advice from reputable and licensed financial professionals who prioritise your best interests and adhere to ethical industry standards.

While addressing immediate financial challenges is the most important thing, it’s also essential to develop a long-term financial plan to prevent similar issues from arising in the future. Once the immediate crisis is solved, you should look at creating a sustainable financial strategy. Facing a loan repayment challenge can be daunting, but it’s important to remember there are steps to resolve this are assistance is available.