What happens if I don't pay an immediate credit ? Surely this question has haunted your mind before acquiring this type of commitment with a bank or lender. Although there may be different measures depending on the case, in this article we will present the main consequences of not paying a loan.
Receiving financing can be a complete relief, but if we do not face the payment of the debt in a timely manner, our worries will grow.
Find out here everything that can happen at the legal level for defaulting on a loan. In this way, you will be able to identify if you are in the best conditions to face a commitment of this magnitude.
What if I can't pay a loan?
Once you acquire financing with a public or private entity, your financial situation may become complicated to a level where you cannot afford to pay the monthly fee. These are some of the consequences of not paying a loan:
Collection of Default Interest
It is very important to pay all your installments on time because from the first day you are late with the payment of an installment, you already begin to suffer from the consequences of not paying a loan.
We are talking about the fact that you will have to pay the entity, default interest that is added to the original debt, causing your amount to be paid month by month to increase . Furthermore, these interests are higher than the ordinary interests of the loan.
Commissions for Claiming Unpaid Quotas
Also, the lender may even charge you a commission just for the fact of claiming the payment of the fee . In this way, the final amount of your debt grows in the face of these penalties.
Once you have been late with the payment of the installment for 3 or 6 months, depending on the lender, it has the right to initiate a legal claim in which the assets of the person who requested the loan could be compromised.
If through the judicial resolution you do not reach any favorable agreement with the bank or you simply cannot pay the loan, then the entity has the power to seize some of your assets as collateral to cover all or part of the money that you must.
In addition, if a guarantor included within the conditions of the contract, one of the consequences of not paying a loan implies that both the assets of this person and the owner may be in danger.
What can you garnish if you do not pay a personal loan?
- If it is a Mortgage Loan
If you acquired this type of financing to acquire a home or property, the entity can request foreclosure before a judge. After this legal action, you still have a period of one year to pay off your debt, considering that it will be greater than the one you requested in the beginning.
If you do not pay, your home is auctioned and you must abandon it , which would make you lose your rights as an owner, since the lender would become the new owner of your property.
If the value of your home still does not compensate the amount requested from the entity, they will demand this remaining amount from your guarantors and could even seize other assets until your debt is settled. Otherwise you would continue to have an outstanding debt.
- If it is a Personal Loan
When it comes to this type of financing, the conditions are very similar because you have your present and future assets as collateral. This implies that if there is a non-payment, they can seize not only your home but also other assets such as your car, bank accounts, part of your payroll or any benefit you receive.
That is when the figure of the guarantor is also harmed, because in the event that you do not have assets to seize, they can apply this measure to the assets of the person who appears as guarantor in your loan contract.
Appearance in Files of Defaulters
One of the final consequences after the non-payment of a loan and after having gone through a judicial process is the fact of appearing in a file of defaulters such as RAI (Registry of Unpaid Acceptances) or Credit Checker (National Association of Credit Financial Establishments) .
This negatively affects your credit history and when applying for future financing, you will probably be rejected by some entities that take this record into account.
Although it is true that some companies do not grant loans if you appear in these types of files, there are other lenders that grant credits with Credit Checker or RAI without any problem, such as Prestamer or MoneyMan .
What should I do if I cannot pay a loan?
To avoid the consequences of defaulting on a loan, it is best to anticipate the risk of default . As soon as you detect that the due date for the payment of your monthly fee is approaching and you see that it is impossible for you to pay it, it is best to contact the financial institution as soon as possible.
Stopping paying a loan is by no means the best solution to face a complex financial situation. Far from solving something, you would be creating a more serious problem by not communicating your personal case.
If you inform the entity in advance, you play with time in your favor, since together they can come up with alternatives such as:
- Debt restructuring or refinancing.
- Reunification of debts .
- Establishment of new terms and quotas that favor both parties.
- Application of a grace period where you only have to pay the interest on the loan.
Although these measures can make the final loan more expensive, they will always be a better option than simply stopping paying . In this way, the best recommendation is prevention and the fact of having your accounts in order to know if month by month you can respond to your debt.
Of course, paying your debts should be a priority in your personal financial management before any other expense. This way you will avoid any of the consequences of not paying a loan.