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| What does it mean to default on a loan? Posted: 10 May 2021 09:35 AM PDT Summary
If you are looking for a one-stop guide to buying a home, a new car, or even going back to university, you’ll probably be taking out a loan from a bank to cover the initial costs of these investments. Over time, you’ll have to pay the lender back (with interest), but life happens and sometimes you might miss a payment or two. But what happens if you fail to pay back the loan in the amount of time agreed upon with your lender? When this happens, this is known as defaulting on a loan. What does it mean to default on a loan? Keep reading to learn what it means to default on a loan, what happens when you default on a loan, and how to avoid defaulting on a loan. What does it mean to default on a loan? Before finding out, enter your ZIP code into our free comparison tool above to find affordable loans from lenders near you. What happens when you default on a loan?So what does default mean? When you default on a loan (default meaning fail to pay a loan back within the time frame agreed upon) you have essentially broken your lender’s trust in your ability to pay back your loan. This comes with many unfavorable consequences. Defaulting on a loan can hugely lower your credit score, signaling to other lenders that you are an unreliable borrower and making it harder for you to qualify for another loan in the future. Even worse, if you default on a loan your debt will only continue to grow as late fees and other penalties are added to your account, increasing the amount you have to pay back—not to mention the growing interest you’ll still be charged. The worst-case scenario if you default on a loan? You could face garnished wages or even have your bank accounts frozen until you take steps to start repaying your loan. You likely won’t qualify for any more loans until you do. In many cases, if you miss a payment or two you should be fine as long as you make up that payment within a few weeks or months. Make sure to consult your loan agreement to see at which point your loan is considered default. How do you avoid defaulting on a loan?So now that you know the nasty consequences of defaulting on a loan, you’re probably wondering how to avoid defaulting on a loan in the first place. Well, the first place you can start is by communicating with your lender. If you’re having financial difficulties, let your lender know and ask about any arrangements that can be made. You’d be surprised how accommodating some institutions can be. If you’re struggling with student loan debt, look into the many relief options available to you. You may qualify for deferment, forbearance, or income-based payments that can make your loan more manageable. You can even refinance your student loans to save money on interest. If you have a mortgage loan, you should also consider refinancing your home in order to lower your monthly payments. Learn how refinancing student loans digs borrowers out of debt. Of course, the easiest way to avoid defaulting on a loan is to make your payments on time and in full. Doing so will not only save you the stress of defaulting but will also improve your credit score and help you secure loans in the future. What does it mean to default on a loan? Now that this has been answered, enter your ZIP code into our free comparison tool below to find affordable loans from lenders in your area today. The post What does it mean to default on a loan? first appeared on Loans.org.  |
| How to Build Credit Without a Credit Card Posted: 10 May 2021 09:33 AM PDT Summary
In this fast-paced, busy world, building and maintaining a good credit score is extremely important for your financial well-being. A good credit score is necessary in order to qualify for a mortgage loan, an auto loan, and even to apply for a credit card. But if you’re a young person just in the process of becoming financially independent, you may be wondering how to build credit without a credit card. It may seem daunting to start building credit, but stick with us and we’ll show you how to build credit without a credit card and how to build credit fast so that you can start applying for loans for the house and car of your dreams. But before you continue, enter your ZIP code into our free comparison tool above to find affordable loans from lenders in your area. How do I build credit without a credit card?If you’re a young person without a credit card, you’re probably wondering how to build credit without a credit card. It seems like an oxymoron right? After all, in order to qualify for a credit card in the first place, you usually have to have an established credit history. But how can you do that without a credit card? Well, the goods news is there are ways to build credit without a credit card. For example, if you’re a recently graduated college student you likely have some student loans to pay off. If you make sure to make your student loan payments on time and in full, this will help establish a credit history. For many young adults, this is the first chance they have to start improving their credit scores. Another option is getting credit for paying your bills on time and in full. Credit reporting companies like Experian may allow you to use a rent-reporting service to take a bill you are already paying and have it reflected on your credit report. In this way, paying your phone bill and utilities on time and in full helps build your credit score, bringing you one step closer to qualifying for that credit card or a new loan. How do I build credit fast?The steps we mentioned above are great, but they take time. If you’re desperate to get approved for that mortgage loan for your dream home, you’re probably wondering how to build credit fast. Well, the fastest way to build credit is with a credit card. But since you may not have one yet, the next best thing is to get a secured credit card. A secured credit card works much like an unsecured credit card except it requires a cash deposit up front, usually a minimum of $200. The deposit is then held in a bank account which you then withdraw from. You can’t take out more than the deposit is worth and you’ll be charged interest if you don’t make your payments on time. Keeping up with this secured credit card account will help you build credit fast until you qualify for an unsecured credit card. Another option is to get a credit-builder loan or a secured loan. Unlike a standard loan, the funds won’t be available to you right away. Instead, the bank will hold the loan amount in an account while you make payments. Once you pay back the loan fully, you’ll have access to the funds. This allows you to build savings and build credit at the same time so that you can qualify for a mortgage loan, auto loan, or a credit card in the future. And finally, ask your parent or guardian if they will make you an authorized user on their existing credit card. This will add the card’s payment history to your credit files so that you can start building credit. Of course, make sure the primary user has a good history of making their payments on time before you try this. If not, they could end up bringing your credit score down with theirs. Well, now you know how to build credit without a credit card. Before you go, enter your ZIP code into our free comparison tool below to find affordable loans from lenders in your area today. The post How to Build Credit Without a Credit Card first appeared on Loans.org.  |
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