Isn't That Rich Podcast

When taking out a loan, the last thing anyone anticipates is falling behind on payments. But life has a way of throwing curveballs—job loss, divorce, or even unexpected medical bills can quickly lead to a situation where keeping up with loan payments becomes challenging. We sat down with Tom Jones, the President of Farmers State Bank in Alto Pass, to discuss what to do if you find yourself facing loan delinquency and how the bank can help you navigate through it.

Understanding Delinquency: When Are You Considered Late?

Delinquency occurs the moment you miss a payment on your loan. According to Tom, as soon as you break the promise to make a payment by the agreed-upon date, you are considered late. While grace periods exist—usually 10 days for auto loans and 15 days for residential real estate loans—the loan is technically late the day after the due date.

It's crucial to understand that even if you're within the grace period and won’t incur a late fee, your loan is still considered delinquent. If your payment reaches 30 days late, it will negatively impact your credit score. Tom emphasized that it’s much harder to build up your credit than to tear it down, so avoiding those 30-day late marks is essential.

Common Causes of Delinquency: Life Happens

Tom shared that the most common causes of delinquency he sees are related to significant life changes like death or divorce. Many loans are approved based on two incomes, so when one income is lost, it can become difficult to keep up with payments.

Divorce, in particular, can be tricky. Even if a judge rules that one party is responsible for paying off the loan, both parties are still legally liable to the bank unless the loan is refinanced. This can lead to complex situations where one party is unable to maintain payments on their own.

Another major cause of delinquency is job loss or injury. When a primary income is disrupted, it’s important to communicate with your bank immediately. Tom stressed the importance of reaching out to your loan officer as soon as you know you might miss a payment—this allows the bank to work with you to find a solution before your credit is affected.

The Bank's Role: We're Here to Help, Not to Hurt

One of the most important points Tom made was that the bank’s role in the collections process is to help customers, not to harm them. “Our goal is to get you back on track,” Tom said. Farmers State Bank strives to assist customers in maintaining or improving their credit scores, understanding that credit affects everything from loan approvals to insurance rates.

Tom shared that communication is key. If you're struggling to make payments, the worst thing you can do is ignore calls or letters from the bank. The sooner you reach out, the more options the bank has to help you.

What Happens If You Default?

If your loan reaches 30 days late without any communication from you, the bank will start contacting you more aggressively. At 45 days late, you’ll receive a certified letter that you must sign for, indicating that the situation is becoming serious. If you continue to ignore the bank’s attempts to reach you, your loan may eventually be turned over to the bank’s attorney for foreclosure.

However, Tom reassured us that even at this stage, there are still opportunities to bring your loan current and avoid losing your property. “Until it gets to court, you still have a way,” Tom said. Whether it’s through a forbearance agreement, finding ways to cut expenses, or even seeking help from family, the bank will work with you to find a solution—as long as you’re willing to communicate and collaborate.

Final Takeaway: Communication Is Everything

Tom’s final piece of advice was simple but powerful: “Communicate with your bank.” Whether it’s calling them back, opening your mail, or setting reminders for payments, staying in touch with your bank can make all the difference in avoiding loan delinquency and protecting your credit.

Remember, the bank is on your side—they want to see you succeed. So don’t be afraid to reach out if you find yourself in a tough spot. Farmers State Bank is here to help you navigate those challenges and keep you on the path to financial stability.

If you want to discuss your loan situation or have any questions, you can reach Tom at Farmers State Bank in Alto Pass at 618-893-2464 or email him at [email protected].