Loan Default Situations
Once you have entered into any loan agreement, it is essential to keep paying your installments on time, since even one missed payment can be enough to make your account delinquent. Generally, a certain number of missed payments, for instance six or nine, lead to your account being considered in default.
In case of problems in repaying a loan, the best course is to negotiate with your lender to alter the terms of your loan. Most lenders would prefer to avoid a default and while they will not change the terms drastically, they may be persuaded to make minor adjustments. Further, try to economize as much as possible by looking into every conceivable way to save money to pay your loan – return your landline if you can do with only your mobile phone or opt for a low cost VoIP solution. If things are bad, look at doing away with small extras such as cable or shopping. In extreme situations, talk to a bankruptcy lawyer – often these lawyers offer free consultation. Do not make the mistake of taking out another loan in order to pay back the first loan.
Defaulting on your loan can carry some serious consequences that affect your financial future in the long or medium term:
- Your credit rating can be affected, impacting all your future financing options for home, car, business or personal loans
- The current loan cost may escalate with the collection charges and late fee tacked on
- The entire amount outstanding may become payable immediately, making your financial situation more difficult
- Any security given against the loan may be seized by the creditor
- The lender may sue you for the loan amount
- Your wages may be garnished to pay the lender
- Many benefits and options on loan repayment and installments may be lost to you