What happens when you default on a private student loan? It is simple. When you default on a private student loan, the lender or loan servicer may take legal action against you. Defaulting on your private student loans also has other dire short and long-term consequences.
What Happens When You Default On a Private Student Loan
Defaulting on your student loans may be detrimental to you in so many ways which may include wage garnishment or even seizure of tax refunds and it will in turn damage your credit report thus making it very difficult for you to qualify for future loans. The act of defaulting on your student loans also will lead to higher interest rates as well as increased difficulty in getting back on track in regard to financial terms.
What to Do If You Have Defaulted On a Private Student Loan
When you have defaulted on your private student loans, there really isn’t much you can do than just get ready for the consequences. But even at that, there are still a couple of things that you can do to salvage the whole situation and some of them are;
- Contact your lender or the servicer of your loan.
- Check for forbearance or deferment options.
- You should review the options of consolidation or even refinancing.
- Try the option of budgeting with counselors.
- Communicate with your lender or loan servicer regularly.
These are about some of the things that you can do in the event you default on your private student loan payments.
How to Avoid Private Student Loan Default
Defaulting on your private student loans is something that you should avoid by all means. But in the event that you eventually default on your loans, you should do everything in your power to sort it out as it has dire consequences both in the short and long term. But with that being said, instead of defaulting on your loans in the first place, there are ways and mediums in place that you can actually utilize to avoid defaulting on your loans and they are;
- Create a budget and then stick to it.
- You should consider options such as loan deferment or forbearance.
- You should try loan consolidation.
- Explore other alternative payment plans.
- Lastly, you can set automatic payments on your bank account.
Can Student Loans Be Forgiven If In Default
In the event that you are holding out for forgiveness on your loans in the future then you should not default on them as defaulted student loans whether federal or private cannot be forgiven. It is however very much possible to renegotiate the terms of the loan or make use of other several options at your disposal such as deferment or forbearance in order to avoid default and then make your payments more manageable.
How to Clear Off Defaulted Student Loans
Clearing off defaulted student loans is very difficult but not impossible. The best way to clear off your defaulted student loans is simply by working with your loan servicer. Your loan service can help to explore other options for you for getting out of default. And such options include rehabilitation or consolidation. It is however very important to quickly act and also be proactive in order to avoid the long-term consequences of defaulting on a student loan term.
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