How to Prevent Bad Credit from Occurring During a Pandemic
We can prevent bad credit by taking various anticipatory actions. In this time of pandemic, most people’s economy is becoming more difficult. The decline in sales turnover to salaries that are no longer full make it difficult for some people to pay the installments they have.
For those of you who still have installments, the tips below you can do to prevent bad credit:
Prioritize your installments
The first tip, you must prioritize your installments first compared to other unnecessary needs. For example, you have a salary of IDR 2,000,000 and monthly installments of IDR 500,000. So, after payday you have to immediately cut your money first to pay the installments. You can use the remaining Rp. 1,500,000 for other needs such as paying electricity & water bills, transportation costs, food costs and housing costs.
If there is leftover, then you can save it or use it for small-scale investments.
Avoid Debt for consumptive purposes
The way to prevent bad credit during a pandemic is that you have to avoid the types of debt that are used for consumptive purposes. You are not advised to go into debt to support a luxurious lifestyle or tend to be extravagant, for vacations, or to buy luxury items that you don’t really need.
Especially when your economic condition is in decline due to the pandemic. It would be better if you borrow for productive purposes, such as to buy merchandise or for business capital. So that later, the profits that you can get from the business you are running can be used to cover the installments.
You are also not advised to go into debt for investment. Investments must be made using “cold money” or your really loose money, aka you will not use it in the next few years. Investments, such as stocks, crypto and the like, do have high returns. However, this is in line with the high risk.
Don’t neglect to pay debts
Third, make sure you pay your debts on time. Delays in paying debts will only make your debt bigger. You will be subject to fines and the interest on your loan will increase.
Don’t dig the hole cover the hole
The solution to taking another loan to cover a previous loan does sound easy and fast. However, you need to be careful because this can harm you. Your loan will be bigger and more burdensome.
Read also: How to use standalone sms banking
How to Overcome Bad Credit during a Pandemic
Then, what if there is already bad credit. How to handle it? Here are some ways that can be done to overcome this bad credit:
Rescheduling/ Reconditioning/ Restructuring (R3)
The first step is Rescheduling/ Reconditioning/ Restructuring (R3). In principle, debt is a type of obligation that must be settled until it is paid off. This itself is influenced by the attitude of various parties in solving the problem so that your debt is said to be paid off.
Restructuring bills is one of the solutions provided by creditors to debtors to make the debtor’s business healthy so that it can fulfill its obligations. Among them are by providing relief on billing interest rates, reducing bill interest arrears, extending billing period, adding billing facilities, and changing billing terms such as grace period installment schedule, form & nature of bills, and the like.
Creditor Provisional Statement
How to Overcome Bad Credit in the Second Pandemic Period is with a temporary statement from the creditor. The principle is to convert/convert facilities/claims into temporary equity participation in debtor companies which is carried out in the context of saving claims in accordance with applicable regulations.
Fourth is asset management. The principle is the management of assets both guaranteed/unsecured as well as collateral for claims from third parties, excluding assets that are pledged to other creditors.
Fifth, is the sale of assets. If the debtor fails to settle the bill and repay the loan, the assets pledged as collateral will be sold to settle the bill.
This option is often the last step when there is no other way out that is owned by both parties.
Debt to Asset Swap (DAS)/Asset Settlement
The sixth way is to do asset settlement. All or part of the invoice will be converted with payment in the form of the debtor’s property accompanied by an option to buy back or buy back.
Until a certain time, the customer still has the opportunity to buy back the asset. On the other hand, the creditor has the right to sell the asset to another party on mutually agreed terms and conditions.
Debt to Convertible Bond Swap
It is carried out based on the principle of converting the debtor’s obligations into bonds issued by the debtor which gives the creditor an option to convert the bonds into debtor’s company shares or take other actions on the convertible bonds with conditions or terms agreed upon by both parties.
To prevent bad credit during this pandemic, you have to think carefully about the actions you will take. Such as the purpose of debt (urgent or not) and considering your economic condition, whether you can later repay the loan or not.
Then, how to deal with credit that is already bad? There are several options you can do. Such as: Rescheduling/ Reconditioning/ Restructuring (R3), Creditor Provisional Statements, Asset Management, Asset Sales, Debt to Asset Swap (DAS)/Asset Settlement and Debt to Convertible Bond Swap.
Bad credit history will make your loan reputation bad so that you will find it difficult to get another loan in the future. So, don’t let bad credit happen.
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