When you take a loan, your loan lender makes sure that you’ll be able to pay back the loan. They check your current loan obligations, income and overall ability to pay back the loan. But if you fail to make timely payments and get defaulted on your loan, some serious problems occur. If it’s a secured loan, the loan lender confiscates your asset and recovers the loan amount by selling it. But in case of unsecured loan, where no asset is kept as collateral, you have to face different repercussions.
So know happens if you don’t repay your unsecured debts.
Drop in your credit score
Having a loan default on your name can be a big negative red mark on your credit score. If you fail to repay your unsecured debt, your credit score will literally touch the ground. Low credit score means low credibility for you when you apply for a loan next time. So debunking on your unsecured loan will have a huge drop in your credit score.
Difficulty in future credit options
When you fail to repay your unsecured debt, it creates strong ripples in your future loan applications. Banks and NBFCs consider a strong credit score and an equally perfect finance history while granting a loan. When you fail to pay back your unsecured debt, your profile is labeled as loan defaulter. So in future when you apply for any loan, be it secured or unsecured loan, it has high chances of getting rejected. One loan default can lead you to lose your hopes to get a loan in the future.
Legal action against you
If you fail to pay back your secured loan, your loan lender seizes your asset, sells it and recovers the defaulted loan amount. But in case of unsecured loan they can’t do so because there is no asset in question. So here the loan lenders can take legal action against you. This will lead you to face a strong legal suit where you may end up paying the loan amount along with additional charges levied by court for late payment. It will surely consume a lot of your time and energy.
So get a loan against property to consolidate and pay back your unsecured debts at ones!