What option will NOT be available if you are behind on loan payments?

What option will NOT be available if you are behind on loan payments?

A) You can ask to get out of your loan.

B) You can borrow money from friends and family.

C) A financial institution may offer for you to pay a little now and pay the rest after your next pay day.

D) Your financial institution might allow you to defer the loan but you’ll have to pay the interest.

Answer: A) You can ask to get out of your loan.

This option is usually not feasible when you are in arrears with your loan repayment. When a loan agreement is made, the law expects you to pay back the amount borrowed plus the agreed interest as stated in the agreement. Merely asking to “get out” of a loan is not feasible and cannot be done in the majority of cases.

Different problems show up when clients are unable to repay their loans and because of this there are usually various ways in which lenders and financial institutions can assist their clients, but one thing that clients don’t get is debt cancellation. For example, options B, C and D are closer to reality or can be said to be more probable than option A. Asking your friends and relatives for a loan (B) is a decision individuals make appropriately to cover short-term needs. They give short-term solutions associated with the external environment such as paying in installments until the next payday (C). Loan deferment (D) is also another policy whereby the borrower obtains an understanding that repayment will be made after a stated period; again, comes with interest charges.

Other options that can be taken are not enumerated in the choice and they include the refinancing of the loan which means changing the terms of the loan agreement so that the payments can be made easily or consolidation where the various debts are taken and combined with one loan, which has a smaller interest rate. Such a step is equivalent to declaring and, in extremely rare circumstances, can be applied for insolvency, which entails tremendous long-term consequences and does not entitle you to “get out” of your loan without further consequences.

According to my experience, lenders have resource centres to assist borrowers who are having a hard time with their payments to avoid defaulting. However, the ability to rely on making a request to be let off a loan is rather unrealistic in normal lending procedures.