If you fail to repay your loan or fall behind on repaying it, you become delinquent, and the repercussions of this can be devastating. While some lenders do have a grace period of several days, others will deem you delinquent if you miss the deadline. If you go beyond more than one missed payment, lenders will consider the loan defaulted on, which can lead to even more serious repercussions.
What are some of the repercussions that come with failing to pay back a loan?
Your Assets Could Be Seized
If you took out a secured personal loan, any asset you put up for collateral could be seized by the bank. A secured loan may have lowered your interest rate, but missing payments means you could lose the asset such as your vehicle or home.
You’re Assessed Late Fees
No matter what kind of loan you have, becoming delinquent means fees and penalties. If you don’t pay your credit card by the due date, you could be hit with a late fee of $39 or more. If you fail to make the payments, these fees will grow, which leads to even more interest on the account.
Your Account Could Go To Collections
When a loan goes into default, a lender may send the account to collections, which allows debt collectors to reach out to you to attain a payment. Failure to make the payments means you could be sued and have a judgment placed against you. When this happens, the bank is allowed to garnish your wages.
Your Credit Score Will Drop
Missing payments allows the lenders to tell Equifax, TransUnion and Experian – that you fell behind on the payments. Missed payments will cause the score to drop, but how much is dependent on your personal credit profile.
You Won’t Get Other Types Of Credit
A low credit score means it’ll be difficult to attain other forms of credit. If you want to buy a car or home or get a private student loan, you need to have good credit. A delinquent loan means you can’t do any of that until you address the late payments.
You May Need To Pay The Entire Loan Off At Once
Some lenders may force you to pay everything on the loan immediately including any late fees.
How can you protect yourself financially if you find yourself unable to pay for your loan? Here are three things to do:
- Immediately reach out to the lender to see what they can offer to help you
- Sell your extra stuff for some fast cash
- Take on a second job or side job to help you generate extra income to pay on the loan
- Ask for help from your family and friends