Potential Consequences of Defaulting
No circumstances related to the financial problems of the debtor can relieve him/her from the responsibility of fulfilling the obligations of the creditor. Failure or untimely fulfillment of obligations leads to the calculation of penalties, interest, and forfeits. If the debt is not paid for a long time, the financial institution has the right to sue the non-payer.
We recommend you to carefully study and comply with the terms of the agreement you sign when applying for a loan. Violation of its requirements can lead to negative financial consequences and adversely affect your credit history. Information about late payment or non-payment of a loan may further limit your access to credit at all financial institutions.
Missing Payments: It’s Not Worth it!
What is the penalty for the non-payment of a loan if you miss only one payment? Of course, the lender will not go to court for one missed payment. Depending on the organization of the internal collection processes, most often you should expect calls and letters, penalties and fines. There is no need to delay the repayment — non-payment of the loan is not needed, it spoils the credit history.
There are also unique circumstances associated with certain types of loans. For example, if you have a federal student loan in default, you may not be eligible for additional federal student loans, federal loan options like deferment and forbearance or alternative repayment plans. However, you may be able to rehabilitate your federal student loan, get it out of default and get back on a repayment plan.
Sanctions Applied by Creditors
Signing a loan agreement, the borrower must understand he/she assumes the responsibility to repay the monthly payment strictly on time and close the entire debt until the end of the agreement. Even a small loan overdue can ruin your credit history and cause problems. Derogatory marks, including late payments, collection accounts, and defaults can stay on your credit reports for up to seven to 10 years. Sanctions for non-payment of a loan may include:
- the amount of the fine in the percentage stipulated in the contract;
- late payment penalty;
- inclusion in the list of non-payers followed by a ban on obtaining a loan;
- court proceedings entailing seizure of property and impossibility of its further sale.
Fines and penalties are charged for a slight delay in payment for any type of loan. In this case, the lender applies measures such as phone calls with a reminder, letters. If the situation does not change after a certain period, the bank has the right to apply to the court — the property may be seized with its subsequent sale. Another option would be to sell the debt to collectors. It is suggested to immediately negotiate with the creditor as soon as problems have arisen to avoid problems.