What happens if not paying a bank loan.
It depends on the type of loan you had taken out. Most bank loans are taken out for financing a real estate or a piece of land or a car.
If you have a real estate (house) loan than most likely your house is collateral the bank required to use before giving you the loan. As such if you are not paying your bank loan, the house will be forfeited by the bank and sold at an auction to the highest bidder.
If you have a car loan, The same thing applies. The car was used as a collateral against the bank loan and will be repossessed and sold at an auction.
Bank loans on land are the same. land was the collateral. So, if you are not paying your bank loan, they’ll take the land and sell it to the highest bidder.
Banks are also issuing credit cards and personal loans and overdraft loans if you have a checking or savings account with them
These are different loans and don’t use collateral but they use a promissory note. Meaning, you promise them you are going to pay the loan back.
If you are not paying this kind of bank loan,
not much is going to happen. Of course you have to have a genuine reason for not paying the bank loan, because if you take out a bank loan with the purpose of not paying to start with, you are committing a fraud and that might be punishable by jail time and financial fine.
But, if you are taking out a personal bank loan and you are not paying it back because of developed financial circumstances, (for example, loosing job and not being able to find another one) and you are not paying the bank loan, nobody can do anything.
If you have an overdraft loan available on your bank account like most banks in England provides it without asking for it, and you are not paying it, any money you put into your bank account will go towards your overdraft, until it’s paid off.
So if the money you have on your account is used up and you go into your overdraft and used that one up too, and now your rent is due and you put money in the bank to pay your rent, guess what, that money is going into the overdraft first and whatever is left will be available towards your rent or else you again have to draw against your overdraft.
If you are not paying your overdraft bank loan, than might as well go to another bank and try to open an account there, because this bank will take anything you put in towards your arrears and if you can’t straitghten your finacial situation out, this could very well be a perpetual loan.
If you are not paying a personal bank loan back, than see what happens if you don’t pay your credit cards. The exact same thing happens to a bank loan.
The funny thing is, as long as we have credit with a bank or with a credit card company and we use that money we can hardly survive. As soon as we mess up our credit and these loans are not available any more, we are just fine with the money we make.
So, the question is, -why did we take that loan out in the first place?
The reason why and banks know this very well, because it was there and we were able to use it. loans are huge business for banks. The interest income they make on these unwanted loans reach billions per year.
Money is in the pocket of the poor people they say and it’s true. They take loans out by the billions per year and pay interest on them. The banks factor in the risk of some people might not paying them back, but that’s ok with them because it is a gambling loan after all.
There is no security other than the borrowers good will and the faith in them. Banks know that people are generally nice and they always want to do the “right” thing, thus most borrowers will pay the loan back and they’ll (the banks) will make a killing on those loans.
Don’t fall for those news reports that banks are loosing money because of the borrowers. That’s a lie! Banks loose money because of what they gamble on the stock and commodities market. As I said before “Banks know that people are generally nice and they always want to do the “right” thing, thus most borrowers will pay the loan back”.
If that’s all the risk the banks would take they would never go broke. Except of course for the high bonuses and perks. That money also is coming out of depositors money. They are spending the depositors money.
Don’t forget, if you take out a $3,500 dollar loan and making only the minimum monthly payments, it’ll take you 35 years to pay it off. Imagine the interest income on that.
Not paying bank loan.