People take loans to cover the distance between their needs or desires and insufficient finance, but many times, they are not able to pay back these loans. Loan default happens when repayments are not made for a certain period of time. When a loan defaults, it is sent to a debt collection agency whose job is to contact the borrower and retrieve the unpaid funds. Defaulting on a loan will drastically reduce your credit score, impact your ability to receive credit in future, and can lead to the seizure of personal property. If you cannot make payments on time, it's important to contact your lender or loan servicer to discuss the restructuring of the loan terms.
Loan default occurs when a borrower fails to pay back a debt according to the initial arrangement. In the case of most consumer loans, this means that successive payments have been missed over the course of weeks or months. Fortunately, lenders and loan servicers usually allow a grace period before penalizing the borrower. The period between missing a loan payment and the loan default is known as a delinquency. The delinquency period gives the debtor time to avoid default by contacting their loan servicer or making up for the missed payments before it turns into a default or generally categorized as Non-Performing Asset.
There are various types of loans which provide financial assistance and the most common ones include Home loans, student loans, auto loans, credit cards and personal loans