https://getoutofdebt.org/63127/top-10-reasons-stop-paying-unaffordable-private-student-loanMany consumers experience trouble when trying to pay off their private
student loans and unsure of their options when private lenders do not
offer alternative payment plans. Private loans offer less flexibility
than federal loans and sometimes consumers feel trapped by oppressive
interest rates and large loan totals. When it comes to working with lenders,
one of the last things a consumer would think do is to simply stop paying
his loans. However, this may be an effective way to make a lender more
willing to work with you when if you cannot continue to make payments
on your student loans.
Private loans are subject to a statute of limitations and therefore, a
creditor must decide to sue the borrower upon non-payment or lose the
ability to force the borrower to make payments. If a borrower is sued
the creditor must receive a judgment and have that judgment enforced before
it can force payment from the borrower. In cases where the borrower has
been sued, the court often provides a better forum for negotiation of
settlements and realistic payment arrangements.
If a borrower is having financial trouble and cannot make payments on her
private loan, making these payments may damage the borrower’s financial
health beyond repair. If the payments being made are not decreasing the
overall amount owed, it is likely that the borrower will continue to owe
money for an indefinite period of time. Saving your money properly and
setting aside small rainy day funds may actually benefit borrowers in
this situation, even if they stop making payments. Making the minimum
payments on a loan may leave a borrower unable to save for retirement
or pay for emergency health issues. This could result in catastrophic
financial trouble in the future and affect a borrowers overall well-being.
REMEMBER, skipping payments can have harsh consequences including negative impacts
on a borrower’s credit score, increases in the overall balance of
the loan, and potential law suits. However, in certain cases where making
minimum payments becomes a “dead-end path” it could be appropriate.
Borrowers in such a situation should consult a professional and seek advice
as to what type of financial plan would be appropriate.