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If you have taken a loan from any bank, you will have to pay back the principal amount along with interest. Banks make their customers sign contracts where loan default meaning, terms, and conditions of repayment are given in fine print. Lenders may have varying grace period and consideration of loan payment.
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What does it mean to default on a loan?
When the borrower doesn't make repayments for a pre-defined period of time, it means the borrower has defaulted on the loan. The bank or debt collection agency then contacts the borrower regarding the unpaid amount. Take a look at the table below to understand more.
| Loan type | How long until default after last payment? | Grace period? |
Student Loan |
270 days |
90 days to make a payment |
Mortgage |
30 days |
15 days to make a payment |
Credit Card |
180 days |
1 missed payment allowed before penalty |
Auto Loan |
1 to 30 days |
Varies widely |
It decreases your CIBIl score credit card score.
- You might not receive credit from a lender in the future or if you do, it will have high interest rate
- Your asset or collateral might get seized
| Loan Type | What Can Happen After Default? |
Student Loan |
Wage garnishment |
Mortgage |
Home foreclosure |
Credit Card |
Possible lawsuit and wage garnishment |
Auto Loan |
Car repossession |
Secured Personal or Business Loan |
Asset seizure |
Unsecured Personal or Business Loan |
Lawsuit and revenue or wage garnishment |
I hope the tables have helped you understand loan default meaning.
Read more :
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What does it mean to default on a loan ?
Neeli
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2022-07-29T07:40:53+00:00 2022-07-29T07:40:54+00:00Comment
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