Defaulting on loan repayment is not ideal for anybody, no matter how small the amount. Especially if you are a fresher, it could negatively impact your creditworthiness and reputation in the long run as you have just started your career. There may be times when you do everything you can to avoid such a situation, but things are not in your favour. You must still understand the consequences of a default and take necessary measures to prevent such a situation at all costs.
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Penalty and Late Payment Fees
You end up paying the penalty and late payment fees every time you default on a loan, ultimately adding to your overall repayment plan.
Credit Score
Be mindful of and protect your credit score from falling. Credit scores are lenders’ best friends; a bad credit score could be your number one enemy.
Handling Collection Agents and Calls
Every lender has a system that allows them to remind you of your overdue payments. These could be through phone calls, reminder letters, personal visits by collection agents etc. These methods are usually not so friendly and could add to your daily stress until you get back on track.
Future Loans
Defaulting on loans raises a red flag on your profile that the lenders could see very clearly. This may either cause a loan rejection by the lender(s) or an unusually higher interest rate from the lenders.
Legal Actions
Lenders also have the option of taking legal action to recover outstanding amounts. Following a court judgement, this could also lead to the seizure of your assets that you want to avoid.
The best way to prevent such a situation is to keep in touch with your lender and convince them of your honesty. Trying to avoid their calls and letters would add to your woes.
