The Consequences You Face When Defaulting on a Personal Loan
Although they’re extremely helpful in a pinch, personal loans can be troublesome if you fail to make payments. Sometimes, complications happen, and it’s simply not possible to make the payment. While unavoidable circumstances do occur, it’s still best to make sure you always meet your obligations on any loans you take on.
If you have a personal loan that you’re having some difficulty with right now, you may be wondering what the possible consequences are if you simply opt not to pay.
1. Your Credit Score Will Sink
Having a good credit score is important to access the utilities and goods you need in life. If you default on a personal loan, your score can drop up to 130 points lower. Even if you’re not yet defaulted, any late payments will already result in a dip in your score. The longer you miss payment deadlines, the more your score suffers.
2. You’ll Be Beckoning Collectors
Having to deal with debt collectors can be very stressful. If they are from agencies and private firms, you may be facing harassment that is no longer covered by the Fair Debt Collection Practices Act. It can be quite threatening, and at the very least, very bothersome when you’re trying to get by with other responsibilities.
3. You Risk Wage Garnishing and Liens
If you’re already having financial trouble, the last thing you want on your plate is a cut to your wages. Unfortunately, if your debt collector takes legal action against you, then a judge may rule that part of your wages are garnished for debt collection.
Additionally, you can get a lien placed over your home. When your home has a lien, you cannot sell the property or get a home equity.
4. You Can Get Any Co-Signer in Trouble
If you have a co-signer on your loan, you would be putting them under the same risk and exposing them to these consequences. This is because they are also considered legally responsible for the personal loan.
So, if you default, then the legal burden will also fall on them. This means they may also be pursued for collections and be at risk of getting their collateral taken. Their credit score will also lower accordingly with any late payments and defaults.
5. You May Lose Your Collateral
If you’ve taken a personal loan, you can provide collateral for your lender. In the event that you are unable to pay back your loan, they will be within their right to repossess whatever asset you designated as collateral. So, if you used an asset that is important to you, you risk losing it and not being able to legally contest the collection of it.
It can be tough when life puts too much on your plate. It’s always best to know what options you have and what is at risk when you’re dealing with personal loans. It should be noted that you can still recover over time if you ever default, and you should be able to reach out to institutions that can help you get the funding necessary to amend the situation.
If you’re short on funds and in need of fast assistance, Bessemer Finance proudly provides help and personal loans in Bessemer, AL. Our staff is available five days a week, so reach out to us, and we’ll work on getting your loan processed quickly and simply.