How does the participant “cure” the past due payments during the cure period?
There are three options for curing the default, provided the action occurs during the cure period:
- Make a lump sum payment to bring the loan current.
- Increase payments so the loan is current by the end of the cure period.
- Refinance the loan, if the plan’s loan policy permits. Refinancing will pay off the old loan and begin a new loan. However, to avoid exceeding the IRS loan limitations, the new loan must not have a final payment date later than the original loan. In other words, the refinanced loan should merely re- amortize the amount due over the remaining loan period.