THINGS TO CONSIDER WHEN YOU THINK ABOUT DEBT

One Loan, Two Possibilities

The future of a loan has one of two outcomes. No conjuring, forecasting, or magic wand can change this. There are two outcomes, and only two, for any loan obligation.

Pay according to the terms of the loan (pay in full and on time)
Default or breach of the loan agreement (even late payments are a small breach; that’s why you are charged a late fee and your interest rate may be increased)

Of course, Lenders prefer the first outcome. In our experience, consumers prefer this, too. You don’t have to be clairvoyant to understand why. Lenders want to be financially rewarded for making loans, and borrowers want to keep their integrity, avoid unpleasant collection activities, and maintain good reputations so they can borrow again if they choose to.

Both parties want a successful outcome to their transaction.

Lenders are well aware that some loans will not be paid on time, if at all. This is one reason why many loan agreements contain specific provisions about what will happen in the event of default.

REMEDIES FOR DEFAULT

When loans go into default there are, once again, only a few things that can happen, generally speaking.

Borrowers may catch up past due payments and return to satisfactory status
Lenders may attempt to enforce the terms of their loan (with collection calls and letters and with law suits and other legal remedies)
Borrower and Lender may agree to modify the terms of the loan by changing the amount owed or the time when payment is due or both
A Borrower may become completely insolvent or otherwise default on all remaining amounts due so that the Lender is forced to write the loan off as uncollectible bad debt

THE MAGIC BULLET

Amazingly enough, with only two possible outcomes and a small number of solutions, the right choice for any two individual consumers can be quite different. There is no “One Size Fits All” answer to financial distress and problem debt.

There is no magic bullet that will solve every crisis. Yet, there may be a specific solution for your problems that works so well it seems like a magic bullet, the lucky rabbit’s foot, or the answer to a prayer.