Most people, while availing a loan, have every intention of repaying the same to the lenders according to the agreed terms. However, many times it might become impossible for such borrowers to follow through with their intentions due to various unavoidable circumstances. When faced with such situations, the borrowers often become anxious about the likely consequences they would have to face due to their inability to pay back the borrowed money. Most such individuals tend to receive much-unsolicited advice from their so-called friends and well-wishers. They are also misguided by the huge volume of information available online about the best ways to resolve the problem. From seeking fast loans online and even to declaring bankruptcy, such individuals are likely to feel tempted by a wide range of solutions that might seem perfect at the time but can result in greater complications in the long run.
Finding The Right Way Out
While it is normal for borrowers to feel worried and even panic at the thought of defaulting on a loan. This often makes them take the wrong decisions and push themselves deeper into the financial mess. So, rather than freaking out, the borrowers should focus on finding the best ways to solve the problem. For this, they might seek the advice of professional experts and also gain detailed information about the consequences of defaulting on loan repayment. This information can prove extremely critical in helping the defaulters take the right course of action without significantly impacting their financial future. While different lenders have different policies for dealing with loan defaulters, in most cases they start by seeking an explanation from the borrowers.
Consequences Of Defaulting On Loan Repayments
It is a common perception that lenders take stringent action against loan defaulters and in most cases, they might even initiate legal action against such individuals. While this is generally true, it is definitely not the first course of action taken by the lenders. Rather the lenders first try to ascertain the reason that caused the borrowers to miss out on their loan repayments. Moreover, the borrowers are informed well in advance about the likely actions that the lenders might take if the payments are not resumed. So depending on the individual situation of the borrowers, they might have to face one or more of the following consequences after they fail to repay the loan.
Providing Borrowers The Benefits Of Doubt
If the lenders believe that the reasons offered by the borrowers for their inability to pay back the loans are genuine, they might consider giving them the benefit of doubt. In such cases, the lenders may defer the loan repayment for a specific duration or even provide the borrowers the option of extending their loan tenure and reducing their EMI amount. The lenders might even advise borrowers to avail Instant Money loan to help them stride over the difficult time. However, these options are provided only to individuals who have proven their creditworthiness through timely payment of every EMI, maintaining a high credit score, and adhering to the general terms of the loan in every manner.
Seizure Of Assets
In case the lenders believe that the borrowers are unlikely to become capable of paying back their loan within a reasonable time, they might consider the option of seizing their assets. The lenders might seek the help and guidance of legal experts to put this plan into action and also to ensure that it is done within the parameters of law. Since most loans are provided against some collateral, the lenders are authorized to claim ownership of these assets and get back their money by selling them off to the highest bidders. Moreover, the lenders may also charge an additional fee or penalties to recover the losses they suffered.
Negative Impact On Credit Score
The greatest consequence that loan defaulters would have to face is in the form of a significant decline in their credit score. This is because the inability of the borrowers to pay back their loan is reported to the credit agencies by the lenders. Every missed payment results in points getting dropped from the credit score and the greater is the number of missed payments the greater is the reduction in the creditworthiness of the borrowers. This significantly impacts their eligibility of availing any loans in the future, including even short term and instant loans online.
Financial Distress Leading To Health Issues
Missing out on loan payments is often quite stressful for borrowers with honest intentions. As the missed payments pile up, they also feel the pressures of the lenders mounting. On top of it, if the lenders choose to take legal action against the loan defaulters, the borrowers might end up facing a serious financial crisis. The loss of their assets and the minimal chances of getting any financial assistance from other financial institutions may further complicate the situation for them and this excessive stress can result in creating serious health problems.