Question

Formulate a response to these essential questions:

1.     What events might interfere with your ability to repay your loans?
2.     What should you do if you find you are having difficulty making your student loan payments?

Now you are to create 2 Essential Questions you think will help you focus the writing of your Portfolio Project.

• Briefly discuss how your questions will guide the development of your Portfolio Project.

Answer 1

Loan default occurs when a borrower fails to pay back a debt according to the initial arrangement. In the case of most consumer loans, this means that successive payments have been missed over the course of weeks or months. Fortunately, lenders and loan servicers usually allow a grace period before penalizing the borrower after missing one payment. The period between missing a loan payment and having the loan default is known as delinquency. The delinquency period gives the debtor time to avoid default by contacting their loan servicer or making up missed payments.The consequences of defaulting on a loan of any type are severe and should be avoided at all costs. If you miss a payment or your loan is in delinquency for a few months, the best thing to do is to contact the company who manages your loan. Often times, loan servicers will work with debtors to create a payment plan that works for both parties. Otherwise, leaving a loan in delinquency and allowing it to default can, in the worst cases, lead to seizure of assets or wages.

The major reasons for defaulting of the loan happens when the expected cash flows for the customer seizes; ie, the income sources doesn't provide enough monetary supprt for them to repay the loans. Also, when the business they rely on gives negative incomes, they won't be in a situation to repay the loan amount as there will be negative cash available with them.

The consequences of defaulting on a loan of any type are severe and should be avoided at all costs. If you miss a payment or your loan is in delinquency for a few months, the best thing to do is to contact the company who manages your loan. Often times, loan servicers will work with debtors to create a payment plan that works for both parties. Otherwise, leaving a loan in delinquency and allowing it to default can, in the worst cases, lead to seizure of assets or wages.

For federal student loans, the first consequence of default is that "acceleration" kicks in, meaning that the entire loan balance is due immediately. If this balance doesn't get paid off, the government can then withhold tax refunds or any federal benefits that the borrower receives. Debt collectors can also sue borrowers to win the right to seize their wages—and after such a trial, debtors are often charged with the collector's court fees. As with other debt obligations, defaulting on a student loan will send a borrower's credit score plummeting, from which it can take years to recover. Unlike other loans, student loan defaults stay on a borrower's record for life, even if bankruptcy is filed. Additionally, borrowers who default become ineligible to take out any more federal student aid or to apply for loan deferment or forbearance, which can help struggling debtors. The good news is that student loans have a long delinquency period before they default—270 days, or roughly nine months. This allows proactive borrowers to get their finances straight and avoiding defaulting altogether. For borrowers with a delinquent loan, remember that it's most important to stay in contact with your loan servicer and communicate your financial situation to them, especially if you feel that you can't make your loan payments.

If we realize that the loan repayments would be affected in the coming years, or you expect a default in repayment, as a first step, try to control all the unnecessary expenditure which you are incurring at the present. If you are still left with no enough income to repay the loan, first you may consult your bank manager and talk about the same with them. In few cases, they might be able to help you out with the payments by pushing forward your repayments further ahead etc. You must be able to negotiate with them reasonably and gain an advantage in relation to the payment terms.