• Welcome to P2P Lending / NFT Lending Forum.



This was the original Lend Academy peer-to-peer lending forum, since forensically restored by deBanked and now reintroduced to

To restore access to your user account, email [email protected]. We apologize for errors you may experience during the recovery.

Main Menu
NEW LOANS:   | greninja.eth 0.800 Ξ | 981.eth 3.000 Ξ | 190.eth 3.000 Ξ | ALL

Why defaulting on an unsecured loan is a really bad idea

Started by Peter, July 03, 2013, 11:00:00 PM

Previous topic - Next topic


I did a little research on what the consequences are for borrowers who default on unsecured loans.  The following is a short list and by no means complete:

Why defaulting on an unsecured loan is a really bad idea:

-   Default on any loan, and for the next 5 – 7 years (longer in some states), you may find it impossible to get another loan for anything, including a house, car, school, credit cards, personal loans, emergencies, medical treatment, etc.  In essence, you're screwed.  There are high risk companies that may loan, most notably the buy-here pay-here car loan sharks and pay-day loan sharks, but you will pay ridiculous interest rates and may suffer serious consequences if you miss even one of the required WEEKLY payments.  That's a very scary road to be on.

-   For military members loan defaults carry serious consequences.   "The number one reason people in the service lose their security clearance is because of financial problems. And that's something that we absolutely now have to address", Secretary of Defense Leon Panetta said in a press conference last October (2012) at the Pentagon.  A security clearance investigation is an inquiry into an individual's loyalty, character, trustworthiness and reliability to ensure that he or she is eligible for access to national security information.  Investigations consist of checks of national records and credit checks, among other things.  Without proper security clearance a soldier's eligibility for promotion and pay raise is doubtful.  More desirable jobs and/or better assignments and locations become unlikely. Defaulting on loans while in the military carries a heavy price.

-   A poor financial past can hurt job seekers in their job search.  Today many companies check job applicants' credit history as a part of a background check.  To an employer, a poor credit history may equate to a higher risk employee with a greater risk of job failure; a lack of responsibility, lack of financial understanding, and a lack of seriousness. Within tight labor markets employers may quickly "weed out" applicants with poor credit histories, and there's nothing illegal about it, as long as permission is given by the applicant for the credit check.  So what's going to show up?   Delinquencies, bankruptcies, judgments, liens and a list of your loans, mortgages and credit-card accounts; a complete tell-all profile of your past and present financial dealings.  In short, good luck landing a good job with a poor credit history.

-   Here's something that may surprise:  Got turned down for a promotion and can't figure out why?  Some companies check credit histories when employees are considered for promotions, so you can't assume that because you have a job at the company your personal information is going to remain personal.  Especially where there is competition for a position, a poor credit history may hold you back.  Think about that the next time you're late on a payment.

-   Default on any Prosper or Lending Club loan, and according to the prospectuses of both platforms, the defaulter can never borrow again on these platforms.  That's a shame because as many lenders here believe, this may well be the way of the future for consumer borrowing.  Defaulting here could result in long term unintended consequences for the defaulter.  Borrowers also may be screwing over a lender who could possibly be their neighbor, a family member, or a friend.

-   Default on a loan with one lender, and most likely other lenders will quickly find out through one of the 3 credit reporting agencies in the US (TransUnion, Experian, or Equifax) that you've become a high risk borrower.  The consequences of becoming a high risk borrower can be devastating to your other accounts, even if they're in good standing. Credit card companies may (and often do) react to high risk card holders by immediately trimming the available credit on their card, often to a very low limit or to an amount equal to their outstanding balance. The effect of this will further increase the credit utilization ratio, thus lowering the score even further, and creating a vicious downward credit score spiral.  Borrowers are often surprised when letters come in the mail that they no longer have any available credit.

Anyway, that's a few reasons why it's so important to maintain good credit.  I'm sure there are many more consequences for defaulters, so if you know of them, please share them here.     


If you default, you make NJ and Sarah very angry.  And you won't like them when they are angry!


Why not reword the original post in a more PC, more "just the facts" basis and get LC to require all borrowers to sign the statement so the know what will happen. Might be eye opening for many of them.

Rob L

I've always thought to myself that these are not unsecured loans.They are secured by the consequences of default as you very well described. However, I believe it is true that small loans (<$5k) have a higher default rate than larger ones. The effects on a credit score of default on a small loan are pretty much the same as a default on a much larger one.  I have trouble reconciling the higher default rate on smaller loans, but it is what it is. Any guesses as to why?


Maybe you could do some real research, and give us facts instead of platitudes. 

For example, I just don't buy the idea that "many" employers check credit history.  If this is true, please name them, or give us a reference to a source with some credibility and some numbers, eh?  Without some backup, I say either you made this up, or the guy who wrote the article you copied from made it up.

By the way, historically, about 10% of Lendingclub loans have defaulted.


If you are late." alt=">:(" title="Angry" class="smiley" />

Terence Phillips

Getting an online loan is always beneficial. Paying a loan on time each time, I improve my credit history and increase my credit score. Thus, I become a reliable partner for lenders, which give me the opportunity to reduce the interest rate specifically for me. I make" class="bbc_link" target="_blank">such comparison before I get a credit. Only the Internet and a credit card, nothing else is needed in order to get a loan. As always, there are no hidden fees. The interest only decreases after paying off each loan. It's important for me to follow my dreams and my favorite online platform gives me the opportunity to do so. Every day is better than yesterday. Money's no object for me now. I believe that money can't be the goal itself. It's important to use it as a tool for self-realization. There is no need to embarrass myself appealing to friends, family or acquaintances for urgent financial assistance.

NEW LOANS:   | greninja.eth 0.800 Ξ | 981.eth 3.000 Ξ | 190.eth 3.000 Ξ | ALL