One of the biggest problems that can arise in financing is not repaying the loan on time and going into default. Failure to pay on the loan repayment date can have consequences. Let’s learn about the most important ones and how to try to avoid them.
What is the payday of a loan?
When you take out a loan of any kind, one of the most important things is to establish the date of repayment of the financed money. This repayment date refers not only to the amount of time you must pay back all the money but also to the terms (usually monthly) you will pay it back.
The repayment terms or payday of the loan are established at the same time you sign the loan. That is, it is a date that you know in advance.
Not all lenders work in the same way when it comes to establishing the loan payment day. In some cases, it is applied strictly: usually between the first and fifth day of each month, regardless of the day you have started the financing.
In other cases, especially in quick loans or extra-bank financing, the deadlines may coincide exactly with the dates you apply for the loan. For example, if you apply for a quick loan on September 17, you will have to pay it back on October 17.
A very important aspect of the loan repayment days is that they are relevant dates. This relevance is given by the fact that the entity understands a default concerning the amount owed by not paying the loan on the indicated date. Therefore, it is essential to repay the agreed installment on the deadline accepted.
What are the consequences of not repaying the loan on payday?
The first thing to remember about payday and late loan repayment is that not all lenders operate similarly.
We could distinguish two models of lender response:
- Those that grant an extra repayment period with no fees: unless there have been generated receipt repayment charges, some lenders will give a period of spare repayment time when the loan is not amortized on the day. These are short periods, without commissions or penalties, and automatically communicated to the debtor.
- Those that charge fees from the first day: in this case, which is very common, penalty fees will start to be charged from the first day of non-payment of the loan. It is common for these fees to escalate so that the first few days, they are lower, and as time goes by, they increase.
On the other hand, it is important to understand that if each lender applies its conditions, each loan is different in many cases. Some loans provide for the possibility of requesting a deferment just in case you have difficulty with the payment.
For example, if you have to pay your installment on the fifth day, but you will not be able to do it until the sixth day, if you can communicate it previously, you can obtain a period of extension of amortization. In addition, in many cases, there will be no cost (although in others, there will be).
In addition to the above, we should not forget that default is the worst consequence of not paying the loan on time. When you get into arrears, the due installments accumulate; imagine that you have already gathered two installments with corresponding penalties and interest for delay. That generates one of the most serious problems a personal economy can have: credit debt.
The best summary we could make about a loan’s payment date is always to respect it as much as possible. If a specific date has been agreed upon for the payment of the financing, we must maintain the money to face the repayment.
If, on the contrary, for whatever reason, the personal economy cannot face the day of payment of the loan, it is not advisable to let it happen without further ado. It is necessary to contact the lender and look for joint solutions.
In general, the lenders are quite open to making loan extensions: this will probably suppose an added cost, but it will always be smaller than the one entering in default.