Many reasons to apply for a loan exist, with the main one probably being that having this additional money simply allows you to make major purchases without saving up beforehand. Of course, loans eventually need to be paid back, and they generally come with predetermined repayment terms to which you must adhere. Failure to repay this money within the agreed-upon timeframe could lead to financial problems for you in the future. Therefore, it is vital that you work hard to stick to these repayment terms the next time that you take out a loan.
Problems in the Present
Failure to repay your loans can lead to immediate problems in the form of late fees. When you receive credit, it comes with a contract that outlines the terms that you must meet. If you fail to meet these terms, you could be forced to pay additional fees. These fees can add up very quickly, making it very difficult to get out of debt. It is certainly in your best interest to make your payments on time, as failure to do so could overwhelm you even more in the future.
If you are unable to repay your loans, it also becomes a major annoyance because you will have to deal with collection agencies. Once the phone calls start, they usually increase in frequency until you do something about your debt. It can get to the point where you do not even want to answer your phone, since you know that it is a collection agency looking for money.
The main reason why you must repay your loans is because of how it can affect your credit in the future. Once you fail to repay a loan on time, it creates a negative mark on your credit report. Since other creditors use this credit report to decide if they should grant you credit, any negative marks on this report make it less likely that they will give you the money that you need.
These delinquent loans also lower your credit score as a whole, which makes it less likely that you will receive credit. If you do receive additional loans, you will be stuck with higher interest rates because of your lower credit score, which makes it more difficult to repay this money yet again. As you can see, once you fail to repay a loan, the problems can continue for years to come, even if you are able to repay the loan at a later date.
Making Your Payments
The main thing to remember is that creditors simply want to see an effort. Whenever you borrow money, you are given a minimum payment to make each month. As long as you are able to make this minimum payment, you will not receive a negative mark on your credit report. This does not necessarily mean that you will have an outstanding credit score, but it gives a creditor one less reason to deny you a loan.
Keeping your credit score as high as possible keeps the door open for you to borrow large amounts of money in the form of such things as mortgages and car loans in the future, so it is very important that you keep your current loans in good standing.