How failure to repay loans impacts you
Here’s what happens if you have taken a loan from a bank or non-banking finance company, and fail to repay on time:
1 Negative impact on credit report:
If you don’t repay your loan on time or if you default on your loan obligations, it will have a negative impact on your credit score and your credit report. A bad credit score will dampen your chance to get another loan in future.
2 Higher interest rate will be applicable:
If your loan proposal in the future gets accepted, you will most likely have to pay a higher interest rate as financial institutions charge a premium from an individual who they believe does not have the potential to repay on time based on past performance.
3 You are likely to be penalised:
Most financial institutions will ask you to pay a penalty besides the interest and principal amount on the loan. It is an additional cost. However, you can negotiate with the lender on the penalty and get it waived off.
Hence, if you have taken a loan, you should meet your debt obligation on time.