![]() ![]() Having a bad credit score hurts you in several ways. One FICO study showed that paying your mortgage two months late could result in your score dropping by up to 130 points, and could take around seven years to fully recover. Depending on how high your score is to begin with and how long you’re past due, it could hurt your score quite a bit. Your late payments-even before you’re considered to be in default-will be reported to the credit bureaus. Here’s what you can expect to happen: It’ll Hurt Your Credit Score But preparing yourself for some of the common consequences can make the process less scary. Nothing good can come from defaulting on a personal loan. Consequences of Defaulting on a Personal Loan For example, debt collectors aren’t allowed to harass you by threatening violence, using obscene language or other shady tactics. The Fair Debt Collection Practices Act (FDCPA) spells out exactly what debt collectors can and can’t do. However, if you’re faced with default, it’s important to realize that you do have power-there are people who can help you and you have protections under the law. ![]() Default also can have a range of negative consequences on your credit score, and ultimately, on your wallet. Once you’re in default on a personal loan, it unlocks a whole new chain of events, and your lender can start trying to recover its money. When default occurs may also vary by lender and the terms of your loan agreement. But because debt collection is an expensive process for the lender-and there’s a chance you’ll pay up on your own-they’ll usually wait until you’re at least a few months late before actually enforcing the default provision in the contract. Technically speaking, you could be considered in default after you miss your first payment. Once you default, the lender can take the next steps to recover the money you owe them. ![]() What Does it Mean to Default on a Personal Loan?ĭefaulting on a personal loan means you’re behind in making the payments you agreed to in the loan agreement. And more importantly, there are ways to overcome it. Even if you would do things differently a second time, defaulting on a loan doesn’t mean you’re a bad person. But often there’s nothing you could have done-you can’t always prevent job losses, illnesses or disabilities. It’s always worth examining what you could have done differently. No matter how hard you try, sometimes life conspires against you and you have to default on a personal loan. ![]()
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