What What happens if I don't pay back a loan?

When you get a loan, you are building a relationship of trust with the institution that provided the credit. 

She lends you money and expects to receive the amount back within the agreed period (and with interest added). 

But what happens when the loan isn't repaid? What are the consequences? Breach of trust is just one of the problems. 

We've outlined some situations that could happen if you don't pay back the loan you borrowed (or are uncontrollably late on payments).

Negative name

Persistent delay in paying a debt will negatively impact your credit rating with credit protection agencies such as Serasa Experian and Boa Vista SCPC.

Financial institutions usually send information to users before filing a negative report, offering them the chance to reverse the situation. 

So, if you received a collection email or call, try to negotiate the debt with the creditor.

Difficulties in obtaining new credits

Having a negative credit history means that all banks, financial institutions, and stores can see that you're in debt. Once they find out about your situation, companies won't lend you money or offer installment plans. 

So, until you resolve your loan debt and clear your name, you will have great difficulty obtaining any type of credit, whether it be a new personal loan, financing, or other installment plans.

Imbalance in personal finances

Anyone who delays a loan payment can create a debt that's very expensive—and even impossible—to repay. This happens because late interest begins to accrue on top of the loan's interest, quickly increasing the outstanding amount to very high amounts.

If you're having trouble paying your loan installments, try to negotiate payment with the bank as quickly as possible to avoid letting your debt grow so much in a short period of time. 

Collection calls

It is common for financial institutions to outsource collections to offices specialized in negotiating with defaulting customers, when installments of a debt are not paid for a long time.

This type of company works specifically with debt collection. Their methods include constant phone calls to your home and cell phone—any day and any time.

Despite the hassle of receiving debt collection calls, it can be an alternative way to request a debt reduction and clear your name. The chances of getting a debt reduction and being able to pay off your loan are good.

Seizure of assets

In the case of a secured loan, there is a concrete risk of losing the asset offered.

In this type of loan, the borrower offers a property or vehicle as collateral. They sign a contract that stipulates that, in the event of default, the asset can be transferred to the bank as payment for the debt.

There are advantages to offering a property or other asset as collateral for a loan. However, if the person falls significantly behind on their payments, the bank may require the asset offered as collateral to repay the debt. While this is a last resort, it's a real possibility.

And the worst part: in some cases, the person, in addition to losing the good offered, will still have to pay the outstanding balance.

Even with unsecured loans, the lending financial institution can request the court to seize the debtor's assets. In this case, assets such as real estate and vehicles, as well as cash, may be confiscated.

Typically, the asset is auctioned, and the proceeds are used to pay the debt. If the amount raised isn't enough to settle the debt, the court usually orders the remaining amount to be paid in installments. If any funds remain, they are returned to the debtor.

What should I do if I can't pay my loan on time?

After all, now that you know the drastic consequences of defaulting on payments, it's best to stay away from this situation, right?

So, if you're having trouble, here are some ways to help you organize your finances and get your bills up to date:

• Review your accounts;
• Cut unnecessary expenses;
• (Re)negotiate the loan.

Always take care of your financial health!