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6 things you need to deal with when you fail to pay your loans

Getting a loan, if manage properly, can help you in growing your business. But what happens if
you can no longer pay your business loans? Here are some possible scenarios to consider when
you default on your loan:

1. You will pay more fees

Missing out on loan payments may mean having to deal with penalty fees. Depending on the loan
details, the longer you don’t make your payments, the higher fees and other charges that you
need to pay.

2. You may be forced to use your personal funds

Most business lenders will require a personal guarantee from a borrower. If you have partners
running a business, chances are you may all need to pitch in to secure repayment for a loan.
Worse, if you’re the sole owner – you will be forced to use your personal funds to pay for the loan.

3. Your personal property may be at risk

If both your business assets and personal funds cannot cover your loan, then your personal
property (such as your car or your house) may be seized to cover any outstanding amounts as
repayment. Also, if the overdue loan you’ve applied for is used for property, then the lender may
have repossessed it until you pay the full amount.

4. Your reputation will be at stake

As a business owner, your reputation and your brand image matter. This isn’t only for your
customers; your partners, suppliers, and other colleagues need to trust you for your brand to
grow. But missing out on loan payments may just break apart that great reputation that you’ve
worked so hard to keep.

If you’re the sole owner of the business, both your personal and business credit scores can be
affected, which can hurt your chances when availing another loans for your business.

5. You will deal with debt collectors

From unending phone calls to actual visits to your business, all these go hand-in-hand with
overdue loans. Collectors will regularly contact you for your payment. But try your best not to be
irritated – the collectors are just doing their job, anyway. It would be in your best interest to work
with them in coming up with a plan to pay your loan instead of avoiding them.

6. You will face lawsuit

This is the worst case scenario that can happen to you. Lenders that win the case against you
may be given the right to acquire through stricter means to get back the debt you owe them. There
may even be a possibility of forced selling your other assets that aren’t even initially considered
as loan collateral.

Make Sure to Pay Your Loans

Again, these are just some possible scenarios that may happen if you don’t pay your loans.
Always make sure that you know what you’re getting into – proper planning is a great preventive
measure against various business mishaps.

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