Anyone who takes out a loan attests to being informed of what they are committing to and having the capacity to repay it. Only it happens that the borrower, either because he lets himself be exceeded or because he has to face a substantial drop in income, finds himself not honoring his commitment. What are the consequences of an unpaid personal loan?
The obligation to repay the loan immediately
If the loan contract includes a forfeiture clause of the benefit of the term, the lender is entitled to claim the total repayment of the loan in one go, in other words the borrower in default of payment loses the spread which had been granted to him when signing the loan.
In addition to the amount of the unpaid installment (s), the lending organization charges fees for late payment, but it can also claim legal fees to recover the debt, fees to sell, seize or protect the collateral as well as charges for declined payments . Without forgetting that can be added to this bank charges such as unpaid debit charges if the monthly payments are usually debited directly from the account and that the cover is insufficient or bad check costs if a check drawn up as payment of the monthly payment returns unpaid.
Score credit allocation
Needless to say, the lending institution notifies the credit bureaus of the arrears, which then appear in your credit history. This incident will also have the effect of immediately lowering your score, and may affect your ability to obtain loans in the future.
The implementation of guarantees
The advantage of the secured personal loan is that it makes it possible to obtain a loan or an amount of credit that would never have been granted without it or to obtain better rates from the lender. In return, in the event of an unpaid loan, the latter can divest the borrower of the collateral, for example his car, or have his house put up for sale to recover the balance of the loan as well as the additional costs.
If a person has given their surety to guarantee the personal loan, the lending institution will turn against them to obtain repayment.
Calling loved ones or work
If the collection process requires respecting a certain confidentiality, it does not prevent the organization from having the right to contact your loved ones once to find out your address or your address or telephone number. He can also call you at work if he does not have your contact details at your home or has tried to reach you at home without success. These contacts are subject to prior authorization, but note that this permission is generally automatically incorporated into the loan contract.
The lender can also file a lawsuit to obtain a court judgment ordering you to pay your debt. He will be able to take measures of forced execution and thus have your wages, your car, your furniture or your house seized until the extinction of the debt.
If you cannot pay the next installment of your loan, there are solutions provided you take the problem upstream. Start by contacting the lender: you may be able to find common ground and for example postpone one or more monthly payments. Otherwise, you have the option of taking out a quick loan to pay off the due date on time. It will also give you time to analyze the situation and try the different long-term solutions if the problem is more than temporary.