Rehabilitating A Defaulted Loan
Posted By: Dr. Frugal in Loans on 06/12/2007 at 10:11:21
Once you've defaulted on a loan, any unpaid interest is computed and the entire balance of the loan becomes due and payable immediately. Once you reach this point you have several options to avoid the extremely negative consequences of defaulting a loan.
. You can pay it off as a lump sum.
. You can re-establish monthly payment arrangements with the guaranty or collection agency. This is known as rehabilitation.
. You can consolidate your account into one new loan.
Once you come to an agreement for repayment with a collection agency that your lender approves, a new loan is created that overwrites the old, defaulted loan.
Paying things off in a lump sum is difficult, especially if you have already been struggling making monthly payments. Your best bet is making a new arrangement and simply resuming the monthly payments. Frequently the creditors will work with you for something you can afford--remember, they just want their money. Loan consolidation is another option but is essentially just replacing one loan with another and frequently at a higher interest rate.
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