Repay Loans on Time to Avoid the Consequences

The present student loan situation has often been compared to the housing loan bubble that took place some years back. A number of house owners who defaulted on their home loans had to hand over their house keys to the lenders.

In the case of the student loan defaulters however there is no such chance. But they will have to face a number of other consequences that are equally bad. Given below are some of them.

Wage Garnishment
The lenders can get the permission to garnish about 15% of the defaulter’s wage in order to repay the loan. This will be quite a burden for those who have a low wage job and a number of responsibilities.

Low Credit Score
A defaulted loan means a low credit score and less chances of financial assistance in future. But in the case of a defaulted student loan the effect is serious as the borrower is usually a student who is just starting out his/her life.

High Interest Rates on Future Loans
With a low credit score, the interest rates on the future loans, if you get them, is going to be inordinately high. Another problem of a low credit score is that you won’t get a good deal when you consolidate the loans.

Interception of Federal Benefits
There are a number of federal benefits that one is entitled to. But with a defaulted loan in the record the lenders can intercept them along with the tax refunds.

Collection Harassment
The collection agents come on to the scene the moment a loan becomes defaulted. You will have to pay the loan in full along with the additional charges that are applied.

Therefore, an unpaid loan can bring along a host of troubles. So, the best way out is to pay the loans off in time and save your credit score from dropping.