When a lender grants an applicant a loan, repayment is expected to be prompt and accurate. In most cases, a debtor will be required to make loan repayments on a monthly basis. However, this may vary based on the type of loan an individual secures. Each loan granted to an applicant will have different loan repayment conditions attached to the loan agreement. If a debtor fails to adhere to these conditions, he/she may experience negative repercussions.
Generally, failure to make regular loan repayments will result in a poor credit score and a less-than-stellar credit history. If the loan that a debtor has failed to make loan repayments on is a mortgage or a car loan, then he/she may face foreclosure or repossession. Moreover, if the individual’s debt becomes unmanageable and he/she is unable to address loan repayment obligations, he/she may even be required to file for bankruptcy.
In the case of secured loans, such as those for a house or car, a creditor has the right to reclaim the collateral interest that a borrower is required to pay. Every loan will charge interest on the debt garnered over the life of the agreement. Interest rates will vary a great deal based upon the type of loan that an applicant is granted. For example, unsecured loans often have higher interest rates attached than secured loans.
There are various common loans that consumers often obtain. Car loans, home mortgages, and student loans are customary responsibilities for many individuals. Each of these various types of credit has different terms and conditions surrounding the repayment of the loan. For example, student loans, like car loans and home mortgages, are generally paid on a monthly basis. However, a debtor is usually not required to begin paying this loan until he/she has completed his/her education. Over time, the monthly payment will increase.
For example, the first year that a borrower begins repaying student loans, he/she may be required to pay the lender $60 a month. The following year, monthly payments may increase to $80 a month. The thought process behind this practice is that, generally, the longer an individual is out of school, the more likely it is that he/she has obtained a steady, well-paying job. On the other hand, when an applicant is granted a car loan, the monthly payment will usually remain a constant value throughout the duration of the loan.
The conditions of loan repayment vary a great deal from one agreement to the next. Therefore, it is essential for an individual to ensure that he/she understands all of the terms of his/her loan agreement.