Defaulting on a loan means failing to make payments on time, which can have severe consequences. Here are some of the things that can happen when you default on a loan:
- Your credit score will be negatively impacted, which can make it harder to borrow money in the future and may result in higher interest rates on future loans.
- Your account may be sent to a debt collection agency, which will try to recover the outstanding payments.
- You may be subject to withholdings of tax refunds and other federal payments, as well as garnishments of up to 15% of your take-home pay if you default on a federal student loan.
- You may be charged late fees and other penalties.
- If the loan is secured by an asset, such as a car or a house, the lender may seize the asset to recover its losses.
- You may be sued by the lender, which can result in wage garnishments and other legal consequences.
If you are struggling to make payments on a loan, its important to contact your lender as soon as possible to discuss your options. Many lenders will work with you to create a payment plan that works for both parties.
