Finances go up and down every day and things do not always go according to plan. While being unable to pay back credit due to sudden circumstances is normal, numerous consequences are incurred as a result. For instance, if this situation persists, you will be in debt, have to pay late fees, and sometimes, your card gets frozen.
It all depends on many factors, such as the time of the default and the owed amount. As acknowledging a problem is the first key to solving it, you should learn more about nonpayment consequences. Here is a list of four things that occur in case you cannot pay back the credit.
Bad Credit Score
Your credit score is highly important whenever you need to set up a credit card or take a loan. It is the number that indicates the chances of you paying the credit back. A credit score is calculated by lenders by looking at your credit history to know the risk level when they lend you. Late payments or defaults will hurt your credit score and will decrease your creditworthiness to banks, lenders, and service providers. This will cause you problems in the long run if you need to borrow loans. It will put a damper on your payment history, and with each month you do not pay off, you are one step closer to having your account charged off.
Foreclosure of Property Ownership
Paying rent or mortgage is a must regardless of the type of property. The situation becomes increasingly critical the longer you do not pay up and you will fall behind. Lenders then assume the ownership of property, and this is how foreclosure happens. For instance, the landlord or house owner can seize the property and file for a lawsuit in the worst-case scenario. In other cases, you can retain ownership provided that the default is overcome. Rarely can you sell a house in foreclosure, which is why you should tread carefully when approaching the mortgage lender with the pre-foreclosure sale. Keep in mind that this sale will benefit the lender more as it costs less than dealing with debt collection agencies, courts, and representations. Being aware of the main types of foreclosure processes will help you arrange your affairs and act accordingly.
Late Fees and Penalties
In cases of missing due dates or paying less than owed, late fees are going to be charged. Late fees are payments added to credit cards, loans, or other financial agreements. Missing payments add to the original payment with late fees in the next month. The more the delinquencies, the higher the fees. For some credit card holders, they can be one overdue payment away from undergoing credit penalties. Such penalties are higher rates triggered by late payments, bouncing checks, and surpassing credit limits. Normally, you are still given a reasonable amount of time to pay, but the pressing issue with credit issuers and credit penalties is that it is difficult to know how to go back to lower rates.
Frozen Bank Accounts
As the name implies, a frozen bank account is an account you can no longer access due to restraints by the creditor. While you can deposit money, you will not be able to withdraw it, make transfers, write checks, or fund any bill payment services. There are numerous reasons you may exhibit this and default in paying credit is a chief one. Unpaid debts can be a compelling reason for your creditors to freeze your account.