What are potential consequences of defaulting on a loan?

Defaulting on a loan can lead to significant legal and financial repercussions. When an individual defaults, lenders may take legal action to recover the amount owed. This can result in court judgments against the borrower, leading to wage garnishments or bank account levies. Additionally, the lender has the right to repossess any collateral associated with a secured loan, such as a car or house, which means the borrower could lose significant assets.

The escalation of the situation can also entail additional fees and a bleak impact on credit scores, making it harder for the borrower to obtain credit in the future. Thus, the consequences of default can severely affect one's financial stability and future borrowing prospects.