The Consequences of Bad Debt Loans

2007-03-08 10:33:40

( Financial )



There are many consequences following the result of bad debt loans. It is difficult to keep up with the pace of the increase in debt, and other consequences that arise from such bad debt loans.

Loans are taken for many purposes like Mortgages, personal loans and business loans. In many instances, the borrower is unable to service the loans after a time. This makes the loans bad in the financier’s books.

The borrower is unable to pay due to the cascading effect of interest on outstanding balances. This usually happens in such cases, especially in the field of business. A loan with bad credit is often unserviceable.

There are many agencies offering debt consolidation services. These agencies often assess the total liabilities as well as future earning capabilities. Such agencies then provide funds to settle all bad debt loans. Rising cases on bad debt has given erosion to many such agencies, which are coming forward in providing help and assistance.

Often the amount required to repay will be much lesser than the old loans which had turned bad. Such agencies also offer a repayment holiday of a certain period of time. The borrower is thus given a breather from his obligations. Such a gap allows and disciplines the borrower to stream line his operations and improve earning capacity.

In much rarer cases, there are other factors involved when the borrower still faces challenges in making repayments. Some of the challenges are income is uncertain, and it is dependent on many factors. Unemployment due to company restructuring could be one reason for the borrower becoming unable to repay. Many borrowers do have this as a reason most of the time. When there is a slip in payment of monthly obligations, the interest exponentially mounts.

Such interest often cripples the borrower. They are sometimes entangled in debts. Bad debt loans are thus away out for the beleaguered borrower.


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