The minute you receive the loan amount either in your bank account or as cash; the initial thought that may come to your mind is what if you are not eligible at any point of time to repay the loan amount then what will happen? It is a long process to go with which has several things to consider.
This long process makes the person who is not able to payback is called a defaulter. There is a big difference between becoming a defaulter of common loans and SBA Loans. This article will explain in detail the reasons and what will happen to the SBA Loans defaulter.
What is Meant by SBA Loans Default?
There are two terms that are associated with this term; one is delinquent and the other is a defaulter. The borrower faces both situations respectively. The loan becomes delinquent when you have missed a payment by only one day. But you can repay the amount with an extra amount of late fee.
But SBA Loans Default is the term used when the person is unable to pay back the amount not until 90-120 days. The lender will wait till this period but after that, you are termed as a defaulter. After this, a long process awaits the borrower which he has to suffer.
The Reason for Becoming Default:
The only reason that a borrower falls under the category of a defaulter is when he has missed a payment of the loan amount specified through the agreement of the loan application. A borrower may have several reasons as to why he is unable to pay the money.
- The borrower has the simple excuse of forgetting the due date and the penalty pills up. This result in late payment and an increase in the amount that you have to pay.
- You don’t have the required amount that is to be paid. The borrower must have enough capital in the bank account so that you can pay the loan term amount.
- As many people are still not using their digital devices to keep a track of their daily lives; the same can be said for loan payment alerts. They have not turned on the notifications of receiving the bills on their mobile devices.
- Another excuse that the businessmen give is that they are too busy to pay attention to it. They say that they have lots of other work to do so it slips from the mind.
- Many people do not pay the loan amount because it is habitual. They are bound not to pay as it is in their nature. They want to pay but due to some reason, they don’t pay on time.
There are many online companies like Orumfy that try their best to guide the defaulters so that they come out of the dangerous situation easily.
What Happens to Defaulters?
As soon as you enter the defaulter banner certain difficulties are faced by the borrower. But the action is not taken immediately because the lender has to follow specific steps and then take the amount that is rightfully his.
Prior Notice is given:
Initially, a warning notice is given to the borrower that he has passed the due date. In that, the borrower is given a time limit of repaying the loan amount after the due date has passed. The time limit of the notice can vary from one lender to another depending on the amount that the borrower has taken.
Seizing of the Assets:
It is most likely that the borrower pays the amount within the warning time. But when he fails to do so SBA organizations or the lenders takes hold of the asset that was given as collateral. This collateral can be in the form of property or gold. It is the right of the lender to take it so that the borrower can repay the loan amount and free the asset.
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A Compromising Offer:
The lender has the last resort of taking help from SBA so that they can have the money for the guaranty. The SBA gives the lender loan amount and now the borrower is in direct dealing with the organization. An agreement is submitted in which the borrower has to prove that he has the ability to pay back the loan.
Selling the Collateral:
If the defaulter is able to pay the loan amount to SBA, it is good but if not then SBA has to sell the collateral in order to take the loan amount back. It is the last thing that SBA can do if the borrower is unable to pay the amount in time.
US Treasury Department takes control:
The US Treasury Department comes in motion when even SBA is powerless to take the money from the borrower. Extreme measures are taken by the US treasury such as your Social Security and various other benefits are taken. You can get back the privileges as soon as you pay off the loan in full.
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As you can understand by now that it is difficult to do business properly when you are SBA Loans defaulter. So it is wise that you make plans to pay the loan amount on time and never miss due date of payment.