When applying for a loan or credit card and getting accepted, in most cases, you arrange repayment dates and amounts. The lender considers these agreed terms and expects you to keep to them. In some cases, people do not follow these agreed conditions and often miss payments. In the event of a default, charges are added onto the missed payment and you are notified, which can affect your credit score. Continued miss payments, usually around the time of the 6th missed payment, the lender will issue you a default notice.
This article will explain what a default consists of and what to do in the event of getting one.
What is a default notice?
As explained above, a default notice is a letter sent out by the lender when you have failed to make several payments on a loan or credit card. It serves as a final warning to resume payments on the amount borrowed, or further action will be taken. The default will contain the following information;
– Name and address of both the creditor and the borrower
– Agreement type and agreement breach details
– Settlement figure
– Action required by the borrower to remedy the situation
– Intended action of the creditor should the borrower fail to comply with the agreement
Once the default notice has been issued, the borrower has 7 days to comply, after this, the creditor can take the borrower to court. In some cases, the default notice will serve as a final warning and the creditor will not intend to start court proceedings, especially if the debtor intends to fulfil the conditions stated in the notice. In any event, a default notice is mandatory and must be issued before the creditor can take any legal action. The default will also be recorded into your credit report.
What should I do if I get one?
The most important piece of advice when getting a default notice is to avoid letting it go to court. If you are unable to meet the requirements suggested by the creditor, it is advised that you contact them to reach a settlement. In most cases, a creditor will discuss one to avoid losing out on money.
If you have the means to, you should repay the demanded amount as soon as to avoid being taken to court, as this can cost more than the required payment.
If in the event that the default is a mistake, you should contact the creditor, while sending documented proof that is a mistake and once rectified, can be noted on your credit report.
If the default is noted on your report, it will have an effect on your rating, which will influence future creditors decisions to agree to giving you credit. However, this does not prevent you permanently obtaining credit. There are many options to start rebuilding damaged credit history and many companies can act as brokers to provide individuals with bad history, products that can help start to reach an excellent rating.
A piece of advice to avoid defaults in future, ensure that you keep up to dates with payments, consider consolidation loans or set up direct debits to take the payment out of your account and ensure the creditor has the payment.
Bill Turner is a free-lance writer and family man. He enjoys volunteering at his local vet & rescue clinic.