Delinquency And What You Must Know

Falling behind on loan repayment is not unheard of; nevertheless it must be kept at bay as much as possible not just for your stable financial records but essentially for maintaining your sanity too! 

If you are not making payments for your loan, your loan is said to be ‘delinquent’ and you run the risk of defaulting and this is something that you must avoid at all costs. This article deals with just that and what you might have to go through if you are a defaulter.

Understanding implications of defaulting

First and foremost, you must be aware of the aftermath of missing loan payments and for this you need to be aware of the following aspects, namely,

•  How can defaulting a loan repayment create unwanted problems

• When you are defaulting, what does it exactly mean?

• Implications or consequences of defaulting on your loan repayment

• How do you bail out yourself from such a situation

The article will deal with the following topics-

• Consequences of defaulting on a loan

• How to avoid going into default

Consequences of defaulting on a loan

If you have missed loan repayments and your loan has become delinquent, the consequences that you are slated to face range from mild to severe depending on the extent of damage that has been done to your financial image. They include the following-

• Under severe conditions, the outstanding loan balance along with the interest payment that you owe is said to be unpaid and default and is usually referred to as “acceleration”

• This is a very serious condition in which you are barred from making any choice as far as repayment plans are concerned. Also, you are deprived from receiving forbearance as well as deferment.

• You also lose the benefit of availing federal student loans

• That you have defaulted will be reported to the credit bureaus that will negatively impact your credit score and the sane gets reported into your credit report. Most importantly, your ability or eligibility to avail credit for buying an asset regardless of whether it is a vehicle or house will be impacted.

• Tax refunds and federal benefits that you are entitled to will be withdrawn and instead the proceeds of the same will be used to offset the loan amount that you have fallen behind. This is usually referred to as “Treasury Offset”

• A portion of your wage will be withheld so that it can be paid towards your loan repayment outstanding balance.

• Severe consequences will include you being driven to court by your creditor

• You have to deal with attorney fees, court expenses, collection costs and any other expense that you might have to incur to nullify the bad results of loan default

• You will also not be able to make any transactions if you want to buy assets related to real estate

• Most importantly, you might take several years to build your credit again

How to avoid going into default

If you have missed a payment or two and you can foresee unpleasant circumstances coming your way, it is best to talk to your lender as soon as possible. This will allow you to work out ways to prevent yourself in getting into further financial mess. Before the situation goes beyond control, you must arrest it right there. While the situation is still under control, you have the option to work out ways to prevent further default.