Covid-19 affected everyone’s lives, mostly in a bad way. Businesses are closing. Livelihood is lost. Job opportunities are gone. You find yourself either on your way back to Philippines together with other OFWs who were repatriated or staying in the country – in the meantime – while waiting for deployment. <\/p>\n\n\n\n
Since your employment overseas was postponed, you might be worried about a lot of things including the loans you have to pay. <\/p>\n\n\n\n
That being said, what happens in case of delay in loan payments? <\/p>\n\n\n\n
First, Let’s Define Loan Default <\/strong><\/p>\n\n\n\n Every loan contract specifies loan details, including loan term and penalty clause. Loan default is when you are unable to pay your monthly loan payments for a certain period. This is different from loan delinquency wherein loan is unpaid for a long time. <\/p>\n\n\n\n Usually, lenders, particularly large banks, give up to 90 days grace period before they can tag a borrower in default. After 90 days and no payment is still given, your account will be classified as “in default.” <\/p>\n\n\n\n When this happens, the following situations follow: <\/p>\n\n\n\n Situation\nNo. 1: Debt Will Pile Up<\/strong><\/p>\n\n\n\n This is the most obvious effect of\nnon-payment of loans. Your loan is continuous, which means interest will\naccrue. You also have to pay for penalty fees and other charges, which don\u2019t\ncome cheap. Some charge penalty fee for every day the loan remains unpaid. <\/p>\n\n\n\n This simply means the principal amount\nwon\u2019t decrease but the charges are continuously increasing. Your P5,000 loan\ncould double or even triple and you won\u2019t even notice. <\/p>\n\n\n\n Situation\nNo. 2: Involvement Of Collection Agency<\/strong><\/p>\n\n\n\n Lenders have dedicated department or\ngroup of people in charge of collection. They will send collection statements\nand demand payment of loans. Apparently, this will only last for a certain\ntime. After a given period, unpaid accounts will be sent to collection\nagencies, who will now demand payment of loans. Oftentimes, these agencies are\nmore aggressive compared to lenders. <\/p>\n\n\n\n Situation\nNo. 3: Foreclosure Of Assets<\/strong><\/p>\n\n\n\n One of the worse things that could\nhappen to someone is seeing your hard-earned assets taken from you. Lenders\ndon\u2019t want this to happen, which is why foreclosure through public auction is\nthe last resort. <\/p>\n\n\n\n Sadly, lenders will be forced to take\nyour car or house if you are unable to pay your loan. Still, this is their way\nof recovering from their losses for lending money. <\/p>\n\n\n\n Don\u2019t be complacent. You will still have\nto pay for the balance in case the cost of your property is not enough to cover\nthe loan, including additional charges. <\/p>\n\n\n\n Situation\nNo. 4: Poor Credit Score <\/strong><\/p>\n\n\n\n Credit score is crucial, especially when\nyou apply for a loan. This shows how financially responsible you are as a\nborrower. The lower your score, the higher the chances of getting your loan\napplication rejected. Even if your loan application is approved, you will be\ngiven a higher interest rate. <\/p>\n\n\n\n There are many actions that will warrant\na low credit score. This includes non-payment of loans. <\/p>\n\n\n\n Loan\nDefault At The Time Of Pandemic<\/strong><\/p>\n\n\n\n As of this writing, the Credit\nInformation Corporation urged banks not to declare loan defaults during the\npandemic (1). The Bangko Sentral ng Pilipinas also gave banks until March 2021\nto reclassify their respective borrowers\u2019 past due loans. This way, borrowers\nwill have time to keep up with payments and prevent them from defaulting. <\/p>\n\n\n\n Still, don\u2019t rely on this alone. If you have existing loans, then talk to your lender immediately. Discuss and negotiate what can be done so you can slowly pay for your debts and avoid being in default. <\/p>\n\n\n\n A debt is still a debt. Even if there is pandemic, you still have to be responsible for your loan. Pay it little by little instead of none at all. <\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" Covid-19 affected everyone’s lives, mostly in a bad way. Businesses are closing. Livelihood is lost. Job opportunities are gone. You find yourself either on your way back to Philippines together with other OFWs who were repatriated or staying in the country – in the meantime – while waiting for deployment. Since your employment overseas was … <\/p>\n