If you’re a borrower and you stop making payments, it doesn’t mean that you’re out of options. The first step is to contact your lender or creditor and let them know that you have an issue with making your monthly payment, or that you simply need more time to repay. In many situations, lenders will work with borrowers to create a repayment plan based on their individual situation.
What Happens if You Stop Paying a Personal Loan?
If you stop paying a personal loan, your lender will most likely start a collection process. The main goal of this process is to get you to start paying again. If that doesn’t work, the lender may pursue other options, including suing you and getting a court order to garnish your wages or seize your property (if they have collateral).
When it comes to personal loans, there are few things more important than maintaining a good credit score. Lenders look at this number when deciding whether or not to lend money so it is in their best interest if yours remains high. If they decide that you are likely not going to pay off the loan and will instead default on it, they won’t be willing to give you another one anytime soon (if ever).
What Happens to Student Loans if You Don’t Pay Them?
If you don’t pay your student loan, there are a few things that could happen. First, you’ll be charged a late fee typically around $25 per month (or more) if you’re behind by more than 30 days. Second, the amount of interest owed will increase as time goes on. Third, the federal government can garnish your wages or tax refund in order to collect what you owe them. Fourth and finally: You may have your federal aid taken away from you until your debt is settled. When you find yourself in such a situation, it is always best to contact the student loan help center to get a good idea of how to resolve the repayment issue.
What Happens if You Stop Paying a Credit Card Bill?
If you stop paying your credit card bill, the bank can take any number of steps to get the money they are owed. These include:
- Garnishing wages
- Taking assets (like property or vehicles)
- Foreclosure on homes
- Contempt proceedings in court
Your options for getting back on track.
If you can’t afford your loan payments, there are some options for getting back on track. First, talk to your lender. They may be willing to work with you in some way. If not, consider a hardship deferment if you’re struggling due to a medical emergency or other financial hardship.
If none of these work for you and defaulting is inevitable, contact each lender directly if possible and ask what their plans are for dealing with defaulted loans. Some will forgive all or part of the loan balance while others will want full payment plus interest and fees before they agree not to report the account as “defaulted” on your credit history (which could impact future borrowing).
You might also consider consolidating multiple loans into one payment. Some companies, including SoFi, offer this service at a lower rate with no fees, compared with what they would charge per individual loan payment today.
So, what’s the takeaway from all this? If you have a loan you can’t afford to pay, don’t panic. You have options and they aren’t all bad. There are ways to get back on track and make things work again. And when it comes down to it, there’s usually only one thing standing between you and financial freedom: the right step forward today!
