{"id":8528,"date":"2020-04-06T06:36:29","date_gmt":"2020-04-06T06:36:29","guid":{"rendered":"\/blog\/?p=8528"},"modified":"2020-04-08T09:38:41","modified_gmt":"2020-04-08T09:38:41","slug":"what-happens-when-you-default-on-a-business-loan-and-how-to-avoid-it","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/loan-for-business\/what-happens-when-you-default-on-a-business-loan-and-how-to-avoid-it\/","title":{"rendered":"What Happens When You Default on a Business Loan and How to Avoid it"},"content":{"rendered":"\n<p>When you take out a business loan, you have all the intentions to pay it back. The future, however, is uncertain and many a time, business owners simply can\u2019t make timely payments and default on a loan. This can be a result of slow growth, decline in revenue, or other unforeseeable circumstances. So what exactly happens if you default on your loan? More importantly, how can you avoid such a situation?<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-background has-vivid-cyan-blue-background-color\" href=\"https:\/\/tata-blog.osian.dev\/business-loan.html\">Know More<\/a><\/div>\n\n\n\n<p>Let\u2019s find out.<\/p>\n\n\n\n<p><strong>1. What is a Loan Default?<\/strong><\/p>\n\n\n\n<p>A loan default occurs when a borrower breaches a business loan agreement\u2019s terms i.e., fails to make the instalment payments as agreed upon. As a result, the lender can take legal action against the borrower.<\/p>\n\n\n\n<p>The following are some consequences you may have to face if you default on a business loan.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"770\" height=\"400\" src=\"\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-1.jpeg\" alt=\"Business Loan Default\" class=\"wp-image-8531\" srcset=\"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-1.jpeg 770w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-1-300x156.jpeg 300w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-1-768x399.jpeg 768w\" sizes=\"auto, (max-width: 770px) 100vw, 770px\" \/><\/figure>\n\n\n\n<p><strong>2. CIBIL Score Drop<\/strong><\/p>\n\n\n\n<p>Every single instance of default on an instalment is reported to credit agencies by your lender. Ultimately, this leads to a drop in your business and personal credit scores, which decreases your chances of getting a loan in the future.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"770\" height=\"400\" src=\"\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-2.jpeg\" alt=\"CIBIL Score Drop\" class=\"wp-image-8532\" srcset=\"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-2.jpeg 770w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-2-300x156.jpeg 300w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-2-768x399.jpeg 768w\" sizes=\"auto, (max-width: 770px) 100vw, 770px\" \/><\/figure>\n\n\n\n<p><strong>3. Difficulty in Future Approvals <\/strong><\/p>\n\n\n\n<p>Once your&nbsp;credit score&nbsp;drops, it becomes difficult to secure loans in the future. Even if you do get a loan approved, you may be charged a high interest rate. This will naturally affect your repayment capacity as you will have to pay higher EMIs.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"770\" height=\"400\" src=\"\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-3.jpeg\" alt=\"Difficulty in Future Approvals \" class=\"wp-image-8533\" srcset=\"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-3.jpeg 770w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-3-300x156.jpeg 300w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-3-768x399.jpeg 768w\" sizes=\"auto, (max-width: 770px) 100vw, 770px\" \/><\/figure>\n\n\n\n<p><strong>4. Legal Action<\/strong><\/p>\n\n\n\n<p>If you have taken a secured business loan, the lender can seize control over your pledged assets and properties. To recover their loss, they may sell the collateral in a private or public auction. If your loan is unsecured, the lender will typically charge a late fee. They can also file a lawsuit against your business since they don\u2019t have collateral to recover their losses.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"770\" height=\"400\" src=\"\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-4.jpeg\" alt=\"Legal Action\" class=\"wp-image-8534\" srcset=\"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-4.jpeg 770w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-4-300x156.jpeg 300w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-4-768x399.jpeg 768w\" sizes=\"auto, (max-width: 770px) 100vw, 770px\" \/><\/figure>\n\n\n\n<p><strong>Additional Read<\/strong>:- <a title=\"10 Benefits of Taking a Business Loan\" href=\"https:\/\/tata-blog.osian.dev\/blog\/business-loan\/10-benefits-of-taking-a-business-loan\/\">10 Benefits of Taking a Business Loan <\/a><\/p>\n\n\n\n<p><strong>5. How to Avoid Loan Default<\/strong><\/p>\n\n\n\n<p>To avoid\ndefaulting on your loan, take the following steps.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Maintain sufficient balance<\/strong><\/li><\/ul>\n\n\n\n<p>Always have sufficient balance in\nyour bank account to pay your EMIs on time. It is advisable to maintain at\nleast 3 months\u2019 repayment amount in your account.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Be aware of EMI dates<\/strong><\/li><\/ul>\n\n\n\n<p>Stay abreast of the due dates of\nyour monthly instalments to make sure you have the required amount in your\naccount. This will also help you plan your finances should other expenses come\nup. Do note that even if you do miss an instalment, you don\u2019t automatically\nbecome a defaulter; you will, however, be charged a late fee. <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Refinance<\/strong><\/li><\/ul>\n\n\n\n<p>If the monthly instalments are proving to be a bit too much, refinance your debt. Many lenders will help you refinance your business loan. As a result, you may get more favourable terms and smaller instalments. <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"770\" height=\"400\" src=\"\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-5.jpeg\" alt=\"How to Avoid Loan Default\" class=\"wp-image-8535\" srcset=\"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-5.jpeg 770w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-5-300x156.jpeg 300w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/what-happens-when-you-default-on-a-business-loan-5-768x399.jpeg 768w\" sizes=\"auto, (max-width: 770px) 100vw, 770px\" \/><\/figure>\n\n\n\n<p><strong>Additional Read<\/strong>:- <a title=\"Financial Habits That Will Help You in Getting a Faster Business Loan\" href=\"https:\/\/tata-blog.osian.dev\/blog\/business-loan\/financial-habits-that-will-help-you-in-getting-a-faster-business-loan\/\">Financial Habits That Will Help You in Getting a Faster Business Loan <\/a><\/p>\n\n\n\n<p>When it comes to repaying your <a title=\"Business Loan\" href=\"https:\/\/tata-blog.osian.dev\/business-loan.html\">business loan<\/a>, try to never miss a payment. If you\u2019re looking for easy business loans, get in touch with Tata Capital today!<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-background has-vivid-cyan-blue-background-color\" href=\"https:\/\/tata-blog.osian.dev\/online\/loans\/business-loans\/home#!\">Apply Now<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>When you take out a business loan, you have all the intentions to pay it back. The future, however, is uncertain and many a time, business owners simply can\u2019t make timely payments and default on a loan.  <\/p>\n<p><a href=\"https:\/\/tata-blog.osian.dev\/blog\/business-loan\/what-happens-when-you-default-on-a-business-loan-and-how-to-avoid-it\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":8530,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[26],"tags":[],"class_list":["post-8528","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan-for-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.13 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Happens When You Default on a Business Loan? - Tata Capital Blog<\/title>\n<meta name=\"description\" content=\"When a borrower breaches or breaks the installments, they could face a lot of trouble. 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