What Happens When You Don’t Pay Off Your Bank Loans?

Managing your money is a difficult task. There’s no way to anticipate every unexpected expense that will arise in your life. There will be times when money becomes tight, and it could get to a point where you can’t pay off your personal loan from the bank.

Banks perform thorough credit investigations and background checks before approving loan applications, but once they do, they trust that you will pay them back no matter. If you’re unable to pay, the bank will find ways to get back at you.

Here’s what will happen if you fail to pay your bank loans. Of course, we hope that you won’t find yourself in these situations.

1. You’ll be charged with fees and interests.

The longer you don’t pay your loans, the higher the amount you need to repay. Each loan agreement comes with overdue charges that the borrower agrees to pay in cases like these. Remember, these fees and interests are added expenses. They go on top of your loans, which means that it doesn’t lessen your loan balance. You’re just paying the bank even more money.

2. Banks will call you.

Be prepared to get pestered by the bank regularly asking you about your repayment timeline. If they can’t contact you, they can opt to reach your family members and inquire your whereabouts. You should take these calls seriously—it’s also the bank giving you a buffer to think and create an action plan before they move on to any other serious action against you.

3. Your credit score will drop.

Think of your credit score as your financial report card as a grown up. Every overdue or missed payment goes on your permanent record and hurts your credit standing. This will limit and affect your financial management options in the future, such as applying for a new loan, getting an additional credit card, or even merely asking for a higher credit limit. The lower your credit score is, the more banks will deny your appeal for a loan.

4. Your collateral will be subject to repossession.

If you applied a loan for a property, such as a car, house, or lot, you don’t fully own it until you’ve paid the bank the full amount of your loan. They will hold a copy of your title, which will act as a safety deposit for your repayment. If you’re unable to pay for a certain period, the bank can repossess your property, and they will have full jurisdiction on what do with it. For instance, if it’s a house, you will be forced to move out within a specific timeframe. You will no longer be able to get back the money you paid for that property.

5. Banks can seize your savings account.

If you owe money to the same bank that you have a savings or checking account with, they may have the right to access your funds and offset the money that you didn’t pay off. If the bank plays this card, you might have trouble withdrawing your cash or performing any other actions with that account, putting your financial status in larger peril. For instance, any checks you issued using that account will bounce.

6. You could get lawsuits.

The worst-case scenario is you would have to face legal action from the bank because of your inability to pay. If the lender wins the case, the court may help their party acquire the debt you owe. This could result in forced selling of your properties that are not even part of your loan collateral. Evading loan payments are a criminal offense, and it could put you into more trouble down the line.

7. What Should You Do If You Can’t Pay Off Your Bank Loans?

  • Notify the bank in advance. During this time, it’s not a good idea to hide. It’s better to be upfront. Try to minimize the actions the bank will take against you by informing them of your financial troubles. They could give you a longer window to pay for your missed payment.
  • Seek financial assistance. Evaluate where you can acquire the extra money to pay off your loans, whether it’s taking up another job, borrowing from someone else, or seeking financial aid from money management institutions.
  • Consolidate your debt. You can consider taking up another loan to cover your urgent debts. While this would mean transferring your debt to another lender, it could also spell out more flexibility for you—you can select loans with long and flexible repayment terms. This is good news if you’re expecting income at a later time.

Bottom Line

It’s important to evaluate your financial situation thoroughly before applying for any loan. If you find it impossible to manage without borrowing money, it’s advisable to apply for loans with low interest rates so that it’s easier to pay it off. Cashalo has fixed monthly interest rates and flexible repayment options that can suit most lifestyles. Get rid of your anxiety of applying for loans and be smarter in handling your money!