Falling behind on loan repayment is
not unheard of; nevertheless it must be kept at bay as much as possible not
just for your stable financial records but essentially for maintaining your
sanity too!
If you are not making payments for
your loan, your loan is said to be ‘delinquent’ and you run the risk of
defaulting and this is something that you must avoid at all costs. This article
deals with just that and what you might have to go through if you are a
defaulter.
your loan, your loan is said to be ‘delinquent’ and you run the risk of
defaulting and this is something that you must avoid at all costs. This article
deals with just that and what you might have to go through if you are a
defaulter.
Understanding implications of defaulting
First and foremost, you must be aware
of the aftermath of missing loan payments and for this you need to be aware of
the following aspects, namely,
of the aftermath of missing loan payments and for this you need to be aware of
the following aspects, namely,
- How can defaulting a loan repayment
create unwanted problems
- When you are defaulting, what does it
exactly mean?
- Implications or consequences of
defaulting on your loan repayment
- How do you bail out yourself from
such a situation
The article will deal with the following topics-
- Consequences
of defaulting on a loan
- How
to avoid going into default
Consequences of defaulting on a loan
If you have missed loan repayments
and your loan has become delinquent, the consequences that you are slated to
face range from mild to severe depending on the extent of damage that has been
done to your financial image. They include the following-
and your loan has become delinquent, the consequences that you are slated to
face range from mild to severe depending on the extent of damage that has been
done to your financial image. They include the following-
- Under severe conditions, the
outstanding loan balance along with the interest payment that you owe is said
to be unpaid and default and is usually referred to as “acceleration”
- This is a very serious condition in
which you are barred from making any choice as far as repayment plans are
concerned. Also, you are deprived from receiving forbearance as well as
deferment.
- You also lose the benefit of availing
federal student loans
- That you have defaulted will be
reported to the credit bureaus that will negatively impact your credit score
and the sane gets reported into your credit report. Most importantly, your
ability or eligibility to avail credit for buying an asset regardless of
whether it is a vehicle or house will be impacted.
- Tax refunds and federal benefits that
you are entitled to will be withdrawn and instead the proceeds of the same will
be used to offset the loan amount that you have fallen behind. This is usually
referred to as “Treasury Offset”
- A portion of your wage will be
withheld so that it can be paid towards your loan repayment outstanding
balance.
- Severe consequences will include you
being driven to court by your creditor
- You have to deal with attorney fees,
court expenses, collection costs and any other expense that you might have to
incur to nullify the bad results of loan default
- You will also not be able to make any
transactions if you want to buy assets related to real estate
- Most importantly, you might take
several years to build your credit again
How to avoid going into default
If
you have missed a payment or two and you can foresee unpleasant circumstances
coming your way, it is best to talk to your lender as soon as possible. This
will allow you to work out ways to prevent yourself in getting into further
financial mess. Before the situation goes beyond control, you must arrest it
right there. While the situation is still under control, you have the option to
work out ways to prevent further default.
you have missed a payment or two and you can foresee unpleasant circumstances
coming your way, it is best to talk to your lender as soon as possible. This
will allow you to work out ways to prevent yourself in getting into further
financial mess. Before the situation goes beyond control, you must arrest it
right there. While the situation is still under control, you have the option to
work out ways to prevent further default.
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