Should People Who Took Out Personal Loans Pay Them Back?

[Oct 7, 2009.]

 

Let's say, totally hypothetically, that someone--let's call him Jim--took out an unsecured personal loan, and then was not able to pay that personal loan back. Perhaps unemployment. Perhaps underemployment.

In a time when everyone has their stack of bills to pay, the unsecured personal loan seemed like something that could be put aside for a bit.

Now, maybe, it's been six months and Jim still isn't working or gaining any reliable income.

Should Jim pay back the unsecured personal loan? If so, how? If how decided, why?

Seems Absurd But Makes Perfect Sense

The idea of a person's obligation to pay back a loan may seem absurd, but it makes perfect sense for today's American consumer who looks at banks and credit card companies being handed billions of dollars in grants and subsidies.

That person, seeing that spectacle, can be expected to take some time to decide which of these overdue bills is going to get paid, if any.

Yes, Personal Loans Should Be Paid Back

Perhaps the first answer to give on these matters is to state, outright, that unsecured personal loans, even online unsecured personal loans, should absolutely be paid back.

Only look at today's mortgage market to understand that people with credit scores below 600 are going to have a very difficult time owning any property in this country at this point in time. Mortgage rates for "A" borrowers, by contrast, remain at record lows.

Property ownership is merely one reflection of the importance of credit score in today's finance markets.

But That Doesn't Mean This Can't Be Negotiated

The first answer to these matters is apparently opposite to the second, but the second may be of more value to a stressed borrower who wants to do the right thing but seemingly can't.

Settle that debt. Everyone else is doing it.

The interest rate and terms on unsecured personal loans favor the lender at the outset, the loan is by nature given to the borrower on the understanding that the borrower can and will pay the loan back.

Always consider the fact, when contacting or being contacted by a personal lender who wants to be paid back, that many people are not paying any portion of these loans, at all.

Consider, then, distinguishing yourself by offering a reduced settlement of the debt. There are even special loan consolidation experts that can help you get a small loan to settle your old loan.

 

About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.