3 serious consequences of not repaying loans on time

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Personal loan: how does it work?

A personal loan is also known as a consumer loan, where a consumer borrows a sum of money at a usually fixed annual interest rate. Consumers can borrow from banks and licensed lenders in Singapore. These loans generally include an annual fee and must be repaid in monthly installments, over a few months or a few years.

What happens if you can’t repay your personal loan?

As the name suggests, personal loans are to be repaid as they are borrowed and do not receive money. But what if you are suddenly faced with financial difficulties such as an emergency and you are unable to repay the personal loan you have taken out? Most lenders consider a 30-90 day non-payment period to be default. Failure to repay a loan could have serious consequences for the strength of your financial, emotional, and physical well-being.

Now let’s look at some of these possible ramifications.

1. Seized money and collateral

A secured loan is a loan that is backed by collateral that borrowers must put in place for lenders. If you have taken out a secured loan, it pays to ensure that you will be able to repay the loan. Since they are backed by collateral, which can be a property or a car, secured loans generally pose less financial risk to lenders, leading them to offer lower interest rates or borrowing costs. . The danger lies in non-repayment, where lenders could seize ownership of your collateral, causing you to lose it.

If your approved lender is a bank, they may also have access to your bank accounts. It is possible that money in your bank accounts could be seized from you, if the funds in your bank account could be used to pay off personal loan debts that you owe the bank.

2. Legal action brought against you

Failure to repay a personal loan is considered a debt, which means that you, as the borrower, are legally obligated to repay it.

If you are unable to repay your loan due to emergencies or financial difficulties, lenders may be willing to offer other alternatives and options such as loan restructuring or even debt forgiveness.

However, if lenders discover that you deliberately avoided your loan obligations, such as having money in your bank account but not repaying your loan, criminal charges for loan default could be brought against you. Even if the debt is eventually canceled due to extended periods of no contact, legal action can still be taken as a contract has been signed by the lenders and borrowers for the personal loan.

3. Bad credit report

For every loan you default on, it becomes debt and leaves a mark on your credit scores. Are there credit reports in Singapore? Are they really used by financial institutions and employers? The answer is yes, and yes.

A credit report is a record of an individual’s credit payment history gathered from different providers and financial institutions. Credit payment history refers to a list of various factors and records, including credit account history, application activity, and overdue account data.

Overdue account data includes records of delinquencies, which will be posted to your credit report on the date it was uploaded to the system, and will not be removed after 12 month or 3 year periods. , which is the case for credit card refunds. and closed credit accounts respectively).

Having a bad credit score on your credit report is definitely undesirable. But what could happen? Below are some of the unsavory circumstances you could find yourself in with a bad credit rating.

4. Disqualification for large loans and financial resources in the future

If you have not repaid your personal loans, it will be more difficult for you to apply for credit in the future. If in the future you need to take out home, school or car loans, the chances of your application being successful are reduced due to your default. This is because most lenders would ask the credit bureau to check your credit report to verify your creditworthiness before making a decision on whether to lend you.

Having a bad credit rating due to the presence of a default would cause banks and future lenders to consider you insolvent, depriving you of future opportunities like enrolling in college or buying a car or house. .

5. Disadvantage during job search

Besides lenders asking to see your credit report, prospective employers, especially those in the financial sector, may also ask to know your creditworthiness. If you have a low credit score and a history of defaulting on payments, it goes without saying that many employers may have the wrong impression about your financial management and decisions, causing you to face difficulties in finding a job. employment in your industry and your preferred functions. in the future.

Are you looking for a loan to finance milestones?

The dire consequences you could face if you fail to repay a personal loan are mostly long term. Choosing a lender and a flexible personal loan with good repayment terms is absolutely crucial. Therefore, it is best not to take loans that we may not be able to repay, as many of these ramifications may be long term and could affect your future.

Do you have financial opportunities in your alley and are looking for a loan to finance them? Finding the personal loan with the best payment terms and, of course, the best interest rates on the market can be overwhelming. To avoid all that hassle, check out our curated list of the best personal loans from banks and approved lenders in Singapore. The average personal loan interest rate in Singapore stands at 13%, while our neatly curated list has a much more affordable average of 8.75%.

1. HSBC Personal Loan

HSBC personal loan has one of the best personal loan interest rates in Singapore as it is one of the market leaders in effective interest rate (EIR), starting at 6%. Another advantage of the HSBC personal loan is its loan term of up to 7 years, which is the longest term available in Singapore.

HSBC personal loan has one of the best personal loan interest rates in Singapore as it is one of the market leaders in effective interest rate (EIR), starting at 6%. Another advantage of the HSBC personal loan is its loan term of up to 7 years, which is the longest term available in Singapore.

2. CashOne Standard Charter Personal Loan

Standard Chartered CashOne Personal Loan is an attractive personal loan for low-income borrowers. It offers a fairly competitive interest rate, with an EIR of 6.95% and a low minimum loan amount of S$1,000. The promotions that come with this personal loan are also numerous, and it is a good choice for taking out smaller loans.

Standard Chartered CashOne Personal Loan is an attractive personal loan for low-income borrowers. It offers a fairly competitive interest rate, with an EIR of 6.95% and a low minimum loan amount of S$1,000. The promotions that come with this personal loan are also numerous, and it is a good choice for taking out smaller loans.

3. Lendela Personal Loan

Lendela personal loan is excellent for those who may have difficulty getting a loan from the banks, don’t worry because there’s Lendela to the rescue too. We reviewed Lendela and found it to be a useful platform for comparing the best approved lenders and personal loans in Singapore. Lendela offers many benefits, including flexible funding amounts, fast cash disbursement, and low minimum income requirement.

Lendela personal loan is excellent for those who may have difficulty getting a loan from the banks, don’t worry because there’s Lendela to the rescue too. We reviewed Lendela and found it to be a useful platform for comparing the best approved lenders and personal loans in Singapore. Lendela offers many benefits, including flexible funding amounts, fast cash disbursement, and low minimum income requirement.

Conclusion

Are you making a major purchase soon? Make the most of your financial opportunities by taking out a personal loan now. One thing to note though – don’t forget to pay them back on time!

The article 3 serious consequences of not repaying loans on time originally appeared on ValueChampion.

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