What happens When You Default on a Loan

A default happens when a debtor is unwilling or unable to pay back a loan in which they are required to pay back. This can include anything from a mortgage, auto loan, credit card and even promissory notes.

There are some debts that you may turn your back on and not see any consequence such as a small subscription to a magazine that you got locked into when you signed up for some service. On the other hand there are debts that if you turn your back on can lead you into a difficult financial situation. You may hear stories of people who have gotten away with debt for a couple of years but make no mistake, it will catch up to you.

Loan debts can occur easily. Monthly payments on loans usually start off affordable but this can turn very quickly. There are so many reasons that can contribute to the cause of personal debt problems such as deteriorating health or loss of employment.

What can happen if I default on my loan?

· Loan default will result in a bad credit rating. When this happens, other borrowing sources will become more expensive and more inaccessible.
· Missing monthly payments will incur further interest and penalties.
· Following a loan default, collection calls will consist of the odd call but will then turn into calls from a debt collection agency and they will aggressively pursue you in order to recover the debt.
· For bigger debt problems, you may have your wages garnished. Your employer will be legally obligated to take a portion (if not all) of your paycheque and send this amount to your creditor.
· You can face emotional distress. Feelings of anger and depression will start to surface and can affect your home life and mental stability.

Loan defaults are bad for you and bad for the economy. It’s always best to make your payments on time. If that is difficult, then ignoring the problem will not make it go away. It’s always best to deal with the problem face on to ensure that you have a brighter future.

For more valuable tips and information about managing money, visit www.prudentcreditrepair.ca