What happens if the Borrower cannot pay off a loan within the time frame initially agreed upon?

Published on: 22 September, 2021

Updated: 10 April, 2024

We understand that sometimes things come up.

If the agreed-upon timeline has elapsed and the Borrower still has an outstanding balance, there are a couple of things you can do:

Extend Your Loan

We first ask both parties if they would like to extend their loan. Upon any new agreement, we allow your original loan to be extended for up to 12 calendar months. At Pigeon, you only get 1 opportunity to extend your loan further.

In the event of a loan extension, either party can choose how much interest they would like for the extended part of the loan to be & repayments will be made on the remaining payoff amount of the loan term.

If your loan has Contract Protection enabled, we will generate a formal addendum that we will add to the end of your loan noting this new agreement and the details of such.

Cancel or Forgive The Debt

Secondly, a Lender and Borrower can come to an agreement to cancel the remainder of the loan if both parties agree to such action. When selecting the reason for your loan cancellation you can mark the debt as Forgiven, or choose from the various other options such as Unable to Make Payments, etc.

Lenders have the ability to unilaterally cancel or forgive any debt on Pigeon without the intervention of the Borrower. This ability automatically triggers if a Lender elects to close an overdue loan that is still active.

If your loan has Contract Protection, this decision will generate a new addendum to your previously agreed-upon contract and wipe clean any outstanding debts.

Trigger a Default

Finally, a Lender can find a Borrower "in breach" of their contractual obligations. To trigger such an event, both a cancellation and extension request must be rejected and exhausted respectively by the Lender. At such a point in time, the loan will end in a default state, and using their generated agreement, the Lender of any given loan is legally allowed to seek measures through a court of law to retrieve any unpaid debts.

Note: For any loans that end up in the overdue state, as a Lender of said loan you may be able to write off the money you lost on your taxes! Read our helpful guide: How to Write Off Bad Debt For Unpaid Loans Friends Owe You

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