What Happens When You Can’t Pay Back Your Personal Loan?
Now there is no particular problem in getting a loan. Banks and microfinance organizations offer a variety of loan products – from payday loans to mortgage loans. In general, almost every adult citizen of the USA can borrow money. But, as practice shows, not everyone can return the money. And then the question arises: what will happen if you do not pay the loan? what consequences await the debtor? and how can you solve the problem?
What Happens If Your Personal Loan Is Not Repaid?
There are various reasons why a person may not repay a loan – from a banal lack of time to a lack of real financial opportunity. But for the bank, it is absolutely not important why its client did not make the next payment. Of course, if you delay payment for several days, the bank can simply remind you over the phone about the need to make the next payment.
If the client ignores the bank’s calls, hides from company representatives and does not respond to their requests in any way, then other consequences will await the debtor.
What are the consequences and what will happen if you do not pay the loan?
- penalties. The bank will charge a penalty fee if you miss your payment and may continue to charge it for every day of delay.
- sale of debt to collection companies. This can be done with or without notification to the client. As a rule, small debts are sold to third parties without the knowledge of the borrower.
- damage to a credit score. Any delay affects your credit history. Of course, a small delay will not affect the credit score in any way, but a delay of 30 days will hurt it. Getting a new loan will be quite difficult.
- filing a lawsuit in court. The creditor will go to court to protect his rights, demand that the borrower return the entire amount of the debt, taking into account interest, fines and penalties;
- confiscation of property by a court decision with the involvement of the executive service and bailiffs in the case. If the borrower cannot repay the debt, the court may confiscate the property.
Secured loans (with collateral and a guarantee) lead to even more complex consequences. Owners of mortgaged housing, guarantors and other persons are involved in the case. Additionally, a borrower may face travel bans, etc.
Therefore, it is so important to understand that taking out a loan in any form obliges the borrower to repay the debt. Even if you face objective financial difficulties, no one relieves you from your obligations. If you understand that you do not have money to make another payment, or the situation is already complicated by delays and fines, then the best option is to seek qualified legal support. This is the best to resolve the situation. There are companies that offer people to go through the bankruptcy procedure and get their legal right to write off the debt.
Things You Must NOT Do When You Cannot Repay Your Loan
In a difficult situation, when you have no money to pay a loan, people often panic and take rash actions. As a result, an already difficult situation is only getting worse. Here are the two most common mistakes that insolvent borrowers with delinquent loans make.
- Attempts to hide from creditors. Refusing to answer phone calls, giving false information about your whereabouts and other ways to avoid responsibility are never successful. Firstly, the lender or collection bureau will sooner or later find the debtor. Otherwise, they will demand the fulfillment of obligations from guarantors and co-borrowers, who are often relatives and family members. Secondly, the consequence of such behavior may be an increase in penalties. Not to mention the fact that life in constant fear is associated with tremendous nervous tension and, thus, damages the physical and mental health of the borrower and his/her loved ones.
- Illegal actions. Any illegal attempts to find money to pay off the debt are criminally punishable, therefore, unacceptable.
Can Loan Payments Be Deferred?
Of course, borrowers are obliged to fulfill their obligations to the lenders. They signed the contract, therefore, they are obliged to fulfill it. This is a legal nuance. But there is another legal norm: you can find yourself in difficult life situations, which allows you to use a deferred payment, restructuring, partial payment, etc.
What are the grounds for obtaining such concessions?
- job loss;
- decrease in the career ladder;
- serious illness;
- illness of a family member;
- death of a family member;
- birth of a child;
- other circumstances affecting the material status of the borrower.
But in order for the lender to make concessions and provide a deferral, each of these cases must be documented. Additionally, you must contact the institution in writing, correctly and accurately formulating the requirements. However, the lender may refuse such benefits or provide the client with a not entirely suitable option. And then the only possible option that leaves the right of an individual under difficult life circumstances to solve the problem of repaying a loan is bankruptcy.
What You Can Do When You Can’t Make a Loan Payment
First of all, there is no need to panic and take new loans from banks – this will dig you into an even deeper debt hole. It is also impossible to ignore the fact of having loans – banks do not forget anything even if they do not call you with the demand to repay the loan.
So, there are several ways to solve the problem.
- Restructuring. Almost all banks can offer it. Restructuring is the stretching of debt for a longer period. As a result, monthly payments decrease and the repayment period increases. This method is suitable if your salary was reduced, one of your relatives fell ill (and you have to spend money on medicines), etc. It is very important that the new schedule and restructuring agreement be drawn up correctly, signed by an authorized representative of the bank, and, of course, certified by the official seal.
- Insurance. It is necessary to study the contract very carefully. It clearly states in which cases your debt will be paid by the insurance company. As a rule, these include: job loss and loss of working capacity due to illness or injury. In order for the insurance company to pay the debt, you need to collect all the supporting documents.
- Judgment. This solution is suitable for people who are having serious financial difficulties. The court will never force you to pay fines and penalties; it is much easier for the court to agree on fair installment terms. Many lenders do not want to waste time on court hearings and are ready to conclude an amicable agreement. The court can return the money if you overpaid the principal amount of the debt. If the property was pledged, the court will force the bank to foreclose on it. If a person has neither property nor money, then the court will force the bank to simply write off the debt. If the bank scares you with criminal liability, then do not panic. According to the law, you can be held liable in two cases: if you are a fraudster who hid important information from the bank, for example, about the size of income, place of work, or from the very beginning you were not going to pay the loan at all; if you are a persistent defaulter with a very high loan amount. Therefore, if you make contact with the bank and voluntarily deposit even small but regular amounts to repay the loan, you will not face criminal liability.
- Compromise. For a lender, delays are a common occurrence, so feel free to go to the bank and try to solve the problem that has arisen. The lender can defer payments and can write off fines and penalties. The main thing is that you have a really good reason.
- Refinancing. Some banks give lower interest rates. In this case, you can refinance the loan on more favorable terms. If you are sure you will get the money in the near future, you can use credit cards: they have a grace period when interest is not charged for the use of funds.
- Carefully study the contract. Have you given your permission to transfer your data to third parties? If not, then the bank violated the law when they had transferred your personal information to collectors. This automatically releases you from any obligation. Did the bank increase the interest rate unilaterally? If yes, then this is also a violation of the law, which can be turned to your advantage.
There are dozens of other nuances that only professional lawyers know about. Therefore, if you find yourself in a difficult situation and do not know how to pay the loan, be sure to contact the specialists. They will listen to you, help you choose the right and most beneficial solution for yuor needs. The main thing is not to panic. There is a way out of any situation.
Category: Online Loans
Tags: finance, loans, money, payments