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Personal Loans Defaulters: Collection Proceedings

Personal loan defaulters are anyone who has missed enough payments in a loan for it to be considered defaulted, or people who don't pay a loan back at all. There are two types of loans, unsecure and secure, and both have different consequences when it comes to personal loans and defaulters. The specific proceedings for personal loans defaulters will vary on the type of personal finance taken out (unsecure or secure), where the loan was obtained and the conditions set out by the company.

Secured loans are personal finance solutions secured on an asset to ensure payment is made. The asset could be a car or house, or anything that covers the value of the loan. If you do not repay a secure loan, you will be liable to sell your asset to pay off the loan.

Unsecure loans are not secured on any kind of asset. You can take out an unsecured loan even if you are a tenant, but unsecured loans normally offer a smaller cash amount than secured loans. Payday loans and short term personal finance are also considered unsecured loans.

Secured Loans - For secure loan defaulters the company will attempt to take the payment several times before issuing a notice of default. If the borrower does not respond to letters, e-mails or phone calls from the lender, then the lender will pass the debt over to a collection agency, who will attempt to recover the loan. If the loan still cannot be recovered, the personal loan defaulter will be taken to court and will have to sell their asset to cover the loan or make any additional repayments decided by the court.

Unsecured Loans - Again, the lender will attempt the take the scheduled payments several times before issuing a notice of default. The loan will then be sold to collection agencies, who will attempt to recover the loan. Personal loans defaulters may wish to look at laws regarding collection agencies, as many agencies for unsecure personal finance collection are notorious for harassment via constant phone calls, e-mails and letters. No matter the loan amount, the collection agencies cannot threaten you with imprisonment or arrest, nor can they enter your home without a warrant; some agencies will insist they can, but only County Court Bailiffs can obtain a warrant for this (and only obtain one in very few instances).

If the collection agency cannot obtain the personal finance debt then personal loan defaulters will be taken to the small claims court. Wages may be garnished or repayments may be issued by the court, with possible consequences for further missed payments legally assigned to the borrower by the court.

In both cases, personal loan defaulters should always attempt to come to an arrangement with their lender before the lender issues collection proceedings, no matter the personal finance option taken.

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