What happens if I default on a private student loan? This is one question that you should consider before thinking of defaulting on your private student loan. Well, this post will help to break down the consequences you get to face in the vent of defaulting on your private student loans.
What Happens If I Default On a Private Student Loan
In the event that you default on your private student loan, the lender in question may get to take legal action against you. This action could include wage garnishment or even seizure of tax refunds as well as damage to your credit report that could at the end of the day make it very difficult to qualify for loans in the future. Defaulting on your loans will lead to higher interest rates as well as increased difficulty in trying to get back financially on track.
When it comes to defaulting on your private student loan, there are short and long-term consequences. And these consequences in question can range from an effect on your credit score to legal action. With that being said, here are the short and long-term consequences that come with defaulting on your private student loans.
Short Term Consequences
The immediate or short terms consequences of defaulting on your private student loan include;
- Damage to your credit score
- Legal action from your lender
- Higher interest rates
- Difficulty in getting back on your financial track
- Penalties such as late payment fees as well as penalties on your next due payments.
Long Term Consequences
Apart from the short-term or immediate consequences of defaulting on your private student loan debts, there are also long-term effects of defaulting and they include;
- Deferred wages
- Difficulty in qualifying for additional loans
- A lower credit limit
- Difficulty in getting a job
What to Do If You Have Defaulted On Your Private Student Loans
In the event that you have defaulted on your private student loan, you should proceed to take some necessary steps in preventing serious as well as long-term consequences. Below are some of the things that you can do if you have defaulted on your student loans;
- Contact your lender
- Check for deferment or forbearance
- Review any options for consolidating or refinancing
- Try out budgeting with counselors
- Communicate with your lender on a regular basis.
What Defaulting On Private Loans Mean
The easiest way to get an understanding of what defaulting means is when you have failed to make payments for 270 days and the said lender in question then declares your loan delinquent. A couple of late payments do not fall under defaulting. The explanation of when the lender considers your loan to be defaulted should also be given on the agreement of your loan.
Difference between Default and Delinquency
It is very important to understand the difference between delinquency and default as it can be quite confusing sometimes. Delinquency simply means when you miss payments on your loan and you are then overdue while defaulting on the other hand is when the lender has declared the loan delinquent after 270 days of missed payments. Defaulting however, can have more serious consequences than the delinquency in question so you should make sure to communicate with your lender on a regular basis in the event that you have missed any payments.
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