What Happens If You Default on SBA Loans.
It reaches a point in life when you find the need for a quick loan. The loan comes in handy at a time when a medical emergency faces you or when you want to pay your landlord rent to avoid forceful eviction. Due to the financial thirst, you have no other choice other than to request for a loan from a lender. At the end of the day, you always go for a loan that is reliable, and that has low-interest rates, a perfect example being the SBA loan.
Although spending money obtained from a loan is always sweet and fulfilling, there is always a disturbing thought that lingers at the back of your mind, that of repaying the loan in due time. With time, you have no other option other than to default on a loan because of the many financial burdens you bear. When you default on an SBA loan, you are likely to face the challenges mentioned below. As a defaulter, your case gets scrutinized in great detail since the loans get usually funded by the Federal Government.
The first step that the bank takes is to directly contact you the borrower either through direct mail or a quick phone call. If you get contacted by the bank but fail to respond, the bank moves swiftly to recover its money from you using the provisions outlined in the SBA loan agreement. The SBA loan agreement forces you to sell some of your items to raise enough funds to pay your bank debt.
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If you fail to honor the rights in the SBA loan agreement, the lender moves swiftly to foreclose your business or property for that matter. As an SBA loan defaulter, you will be required to pay the loan arrears in full, the interest, as well as miscellaneous expenses.
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If it so happens that you have failed to honor any of the above processes, the IRS comes to the aid of the lender. A lawyer helps you to draft an agreement between you, IRS, and the lender, to come up with a better way of solving the issue. Before the Offer in Compromise can take effect, the IRS determines your financial worth to ascertain as to whether or not you fit the bill. Based on the type of arrangement, the IRS pays the lender on your behalf. When the SBA lender rejects your Offer in Compromise request, the only option you get left with is to use the United States Treasury Department as leverage.
When you default a loan knowingly or unknowingly, always be ready to face the consequences. Hence, with SBA loans, there is no escape.