Secured Loans

What Will Happen if I Default?

Defaulting is the name given to the process of a customer not being able to back their mortgage loan, consolidation loans, or any loan for that matter, and the associated consequences. It is a very unfortunate and often devastating occurrence, so borrowers should always be aware of the risks of defaulting so that they will be able to avoid it as far as is possible. Through financial planning so that the borrower understands where the cash is flowing and where it is needed and by taking action when it is needed, borrowers should be able to minimise default as far as is possible.


If it is the case that a customer has not paid several of their mortgage payments and if they have been given sufficient notice by their company, the mortgage lenders will be legally justified in repossessing the property. This often means legal proceedings in which the company will put forth their case and in which the customers will be able to put fourth theirs. If the mortgage company is successful, they will take possession of the property which they will sell to recoup their costs (the value of the mortgage).

Unfortunately for the individuals and families for whom this is a reality, this part of the process means that they will be evicted from the property. This can be a devastating experience, but there are facilities which will be available for them to use from the government as well as advice which can be gained from the government and charitable organisations. Any property which was not named as security in a loan (like the house has been, in that the company can take possession to recoup their costs) will stay in the possession of the family and should be looked after.

Credit Rating

A credit rating is a very important piece of information which is held on customers and is used to inform loan companies when they are looking for a loan. Companies will collect data about borrowers when they go about giving loans to find out whether it is worth their while to give a certain customer a loan and how much they should charge them if they do decide to give them a loan. The way in which a certain customer behaves while they have a loan is recorded, especially if they default on their debts.

Unfortunately, defaulting on a mortgage means that the credit rating companies will be given information which will tell other loan companies that they, as a customer, will be more likely to default on any other loans which they take. This will make it very difficult for them to get a loan in the future, in addition, it will mean that they have to pay more for their loans. This information will be held in different ways by the different credit agencies, but generally, this type of information will apply to a certain person and will affect their chances of getting a loan for six years after they defaulted.

Overall, defaulting is a very unfortunate thing for customers to go through, at they should use all their efforts to avoid it. The effects are devastating in present as well as in the future for defaulters. There are many charities and other organisations which can help borrowers to organise their money to avoid default, which should be consulted if customers have any fears. At the same time, customers who are defaulting have many sources of advice of which they can make use, to make the process as easy as possible and to help them minimise any disruption.