Taking out a loan is a significant financial commitment that needs careful consideration and responsibility. While we hope that you don’t get there, it’s important to know what happens if you ever default on your loan.

Defaulting on a loan is a situation that no borrower wants to find themselves in. It is more serious than missing a single payment - defaulting occurs when the agreed-upon terms of a loan agreement are not met. This might be caused by failing to remedy missed payments even after a set period of time, failing to pay your total amount owed, or violating other terms outlined in your Fortify loan agreement.

If you are worried about missing an upcoming payment, please review our article here about what to do. Remember that missing a payments is not yet a default, and by reaching out to Fortify, you can still avoid defaulting on your loan. However, if you want to know more about what happens if a borrower defaults by failing to meet the terms of their loan agreement, please read on.

The immediate consequences of defaulting can be severe and can vary depending on the loan. Here are some familiar, yet sobering, repercussions that you should know about:

Impact on credit score: Defaulting on a loan can significantly damage your credit score, to a much larger degree than missing a payment. A lower credit score can make future loans you take out for purchases like a house or a car more expensive through higher interest rates or higher fees, costing you money in the long run, and it can even lead to you being turned down for these purchases.

Acceleration of debt: In many loan agreements, default triggers a lender’s right to demand immediate repayment of the entire outstanding balance (both principal and any accrued interest). This means that if you default on your loan, a lender or a debt collector could ask you to pay back the entire amount all at once. For specific terms associated with your Fortify loan, please review your loan agreement.

Additional fees, penalties, and collection costs: Lenders can impose late fees and penalties on missed payments as well as defaults, or even costs associated with collecting a loan. These fees can quickly add up, making it difficult to recover from a financial burden. Again, for specific terms associated with your Fortify loan, it’s important to carefully review and understand your loan agreement.

Legal action: A lender may also take legal action against you to recover the amount of a defaulted loan.

The consequences of default extend beyond immediate financial penalties.

Difficulty obtaining credit: Credit scores are necessary for many aspects of day-to-day life, like opening credit cards, getting a mortgage, or possibly buying a car. A default stays on your credit report for several years making it more expensive or even impossible to do these things.

Limited financial options: A default on your record can limit your financial flexibility and make it harder to achieve your long-term financial goals.

The important thing to remember is that defaulting is more serious than just missing a payment, and it is avoidable even if you don’t have the means to make a payment right now.

The most important thing to do if you’re worried about missing a payment is to communicate with your loan servicer, ZuntaFi. They can help you avoid late fees, avoid damage to your credit score, and restructure your repayments even if you can’t meet your payment obligations right now. Just communicating with your servicer is a big step towards preventing default.

If you’re worried about missing an upcoming payment, please take some time to review our article here with more information. Remember that missing a payment is not default, and you still have options to avoid default.

If you have questions about the impact of defaulting on a loan, please reach out to Fortify support and we’ll do our best to help.