What to Do If You’re Having Difficulty Repaying Your Loans

Having a good track record when it comes to meeting your financial obligations has always been important. Still, it will become even more so now that the Fair Credit Reporting Act has been proclaimed. Financial institutions and other lenders – including companies that offer hire purchase – will have more comprehensive information about your credit history and can use that information to determine whether to do business with you.

The best-case scenario for you is to achieve and maintain a good credit rating by always paying off your debts in full and on time, but even with the best of intentions, this might not be possible. You, or someone in your household, could experience a financial challenge that affects your ability to pay down on your loans. So how can you best manage that situation to minimise the impact it will have on your credit history?

Sasha Shillingford, General Counsel at Republic Bank Barbados, offers some advice:

“The longer you wait where you see a situation arising, and it doesn’t even have to have materialised as yet. So, for instance, you know that you’ve been given a couple of months’ notice that you’re going to lose your job, and you know that down the road you have this mortgage payment or loan payment coming up and this is going to impact your ability to pay that loan. Instead of waiting until the arrears happen, the interest builds on the arrears, and it mounts to such a level where it is now impossible to really try to get it under control, it is better to come into the bank. Come into the bank early, explain the situation, lay your cards on the table. Usually a lending institution will work with you to try to get you back on track.”

Shillingford used the example of the moratoria that banks and other financial institutions offered in the early months of the COVID-19 pandemic to illustrate her point.

More broadly, she says that there are several options for borrowers who find themselves in a financial bind. “Loans can be restructured. The period of the loan can be extended, which reduces your monthly payment. So, there are ways. You can consolidate all your debt. If you have it spread out across different institutions, you can come to the bank and the bank can say ‘I will lend you to pay off all these debts and then you have one payment which is manageable to deal with that situation’.”

The specifics of your situation will help to determine which course of action will be most appropriate for you, but the key is to engage with your financial institution. Not only will this be useful for your immediate circumstances, but also in terms of you maintaining a good track record, something that will become increasingly important in this new era of credit reporting.

Shillingford puts it this way. “It is really critical to work with your lender as opposed to waiting too long and then the amount owed becomes insurmountable…. That can keep your credit score on track. Keep it good if it is good, and if it is starting to go in the wrong direction, it can certainly turn it around.”