With the rise of loan defaults in the country, it has become a major concern for many borrowers. What happens when someone fails to pay back the lender? Typically, borrowers have to face these consequences when they default on their loans.
Bank overdraft fees: Lenders don’t wait when you owe money to them. They will instantly initiate automatic withdrawals from your checking account if you have given them access to it. If they can’t debit your checking account, then they can try to collect whatever money is there in it. This can drain your checking account and cause other bank transactions to bounce, which triggers a bank fee against you.
Frequent collection calls: When you default on your loans, lenders will start calling you after some time. They will send you letters or threaten to take legal action against you. Some lenders may also call your friends and relatives for money. As per the federal law, that is illegal.
Lawsuits: If you assume lenders won’t sue you for a small amount, you’re mistaken. According to Michael Bovee, the owner of a debt settlement company, most lawsuits filed against consumers are for small amounts. Lenders often win the lawsuits simply because consumers don’t appear in the court. The courts issue a summary judgment and collect money from the consumer on behalf of the lender.
Depending on the state laws, liens can be imposed on properties, bank accounts can be levied and wages can be garnished.