This guide is about what to do in that situation. It applies whoever you borrowed from. We publish it knowing most people reading it will not be Alector customers, because it is the most useful thing we can put on a lending website.
Act before the due date, not after
This is the whole guide compressed into one line. Everything you can do gets harder once a payment has been missed.
A schedule that has not yet been breached can be discussed as a live arrangement. An instalment already in arrears has become a problem to be recovered — a different conversation, with fewer options in it, and one that has already cost you standing with the lender.
If you know on the 10th that the payment due on the 25th will not be there, the 10th is when to make contact.
What to actually say
You do not need a formal proposal or a lawyer. You need to be specific, because a lender can only work with concrete information.
Be honest about the size of the problem. Understating it produces a revised arrangement that also fails, which burns the goodwill you have just spent.
- What changed, and when — lost work, a delayed payment, illness, a poor season
- Whether it is temporary or permanent, as best you know
- What you can realistically pay now, if anything
- When you expect income to resume, and how confident you are of that
What restructuring means
Restructuring is rewriting the schedule to fit changed circumstances — usually by extending the term and lowering each instalment, sometimes by allowing a payment holiday.
It is not forgiveness. You will typically pay more in total, because you are borrowing the money for longer. What it buys is a schedule you can actually meet, which is worth considerably more than a cheaper schedule you cannot.
It is not automatic, and no lender is obliged to agree. But it is very often available, because a restructured performing loan is a better outcome for a lender than a defaulted one.
The two things that reliably make it worse
Almost every case that ends badly involves at least one of these.
- Borrowing from a second lender to pay the first. This is the beginning of a debt spiral, and it converts one manageable problem into two unmanageable ones. It is why overdue instalments pause further borrowing with us.
- Going quiet. Silence reads as unwillingness rather than inability, and it removes every option that depended on cooperation. The conversation you are dreading is much easier than the one that follows six weeks of avoiding it.
What you are entitled to
Borrowing from a registered institution rather than an informal lender matters most at exactly this point. Regulation gives you recourse.
- An explanation of any credit decision made about you
- A clear statement of what you owe and how payments have been applied
- The ability to raise a complaint and have it escalated
- Recourse to the relevant regulator if the lender does not resolve it
- Freedom from harassment or intimidation in recovery
Afterwards
Arrears are a status, not a permanent verdict. Settling an overdue instalment restores your ability to borrow with us, and a period of consistent repayment rebuilds a record.
It takes longer to rebuild than it took to damage, which is unfair but true of credit everywhere. The practical implication is simply that early contact is worth more than it feels like at the time.