What happens if I default on my private student loans? Have you ever thought about it? Well if you have, then you should know that you should now in any way let your private student loans get in default. With that being said, continue reading to know everything that gets to happen in the event that you have defaulted on your private student loans.
What Happens If I Default On My Private Student Loans
Before I get into what happens when you default on your private student loans, you should know that the best way to avoid ever defaulting on a private student loan is to stay on top of your payments regularly.
There is a huge and slight difference between late payments and defaulting on your private student loan. Defaulting on a private student loan as you should know is when you have failed to make payments for 270 days and the lender then declares your loan delinquent. If you ever think that you have defaulted on your student loan, then you must contact the lender in question immediately otherwise it could have some serious consequences.
The effects of defaulting on your loans could include legal action from the lender, higher interest rates, or even damage to the credit report. It is very important to avoid defaulting if at all possible, as it can have some really long-lasting negative consequences. Fortunately, there are several ways that you can prevent default and make sure your loans stay in good standing. Continue reading to learn what default means in detail, as well as its consequences, and the steps that you can take to avoid it altogether.
What Defaulting On Private Student Loan Means
One of the simplest ways to understand what defaulting means in regard to your student loan debt is when you have failed to make payments for 270 days and the lender in question then declares your loan to be delinquent. A couple of late payments as you should know do not fall under defaulting. One thing you should know is that the explanation of when a lender considers your loan to be in default should be given on your loan agreement. So do well to read the fine print before agreeing to any form of private student loan.
What Really Happens When You Default On Your Private Student Loans
You should know that there are both immediate and long terms consequences to defaulting on your private student loans and they can range from an effect on your credit score to legal actions and issues.
The immediate effects that come with defaulting on your private student loan include;
- Credit report damage – defaulting on your student loans from a private lender will greatly damage your credit score which can make it really hard to qualify for future loans as well as other forms of credit.
- Legal problems from the lender – the lender in question may result in legal actions against you in the event of a default, such as the seizure of tax refunds or wage garnishment.
- Higher interest rates – defaulting could result in an increase in the interest rate of the loan thus making it very expensive to pay back over time.
- Difficulty in getting back on track financially – once your loan has entered default, it can be very hard to get back on track financially.
- Collection calls and letters – you may get to receive many letters as well as calls from collection officers that will result in pressure for you to pay.
- Penalties – lenders at most times will charge late fees as well as penalties on your next due payments.
Long Term Effects
The long terms effects of defaulting on your loans asides from the immediate effects include;
- Deferred wages – Defaulting as you should know could result in your wages being deferred, thus making it hard to cover living expenses or pay off other debts in the process.
- Difficulty in qualifying for additional loans – Defaulting on your student loan will damage your credit score severely, which can then make it very difficult to qualify for future loans.
- Lower credit limit – Your credit limit may drastically be reduced, thus making it harder to borrow money in the future or even get approved for larger purchases.
- Difficulty in getting a job – Defaulting on a private student loan could really affect your ability to find employment as many employers may view it as a negative mark on your credit report.
MORE RELATED POSTS