Question

When you miss payments on a loan, creditors:
A. can charge excessively high interest on other customers to make

up the difference.
B. must accept the loss as simply part of doing business.

C. have the right to take measures to get their money back.

D. must declare bankruptcy on the loan, which damages their credit
score.

Answer 1

Answer:

C.

Explanation:

It's obviously not A, because that would lead to a corrupt society. It's not B either, because no one would pay if that were a policy, and it wouldn't be any different than giving out money for free.

C is correct. If a debtor misses payments on a loan, the creditor has the right to transfer the amount due plus interest to the next given payment. The next given payment will cost the debtor the amount due previously, plus interest (for being late), and the amount due that month.

For example, a debtor makes monthly payments of $1,000 to their creditor. If the debtor misses this month's payment (which equates to $1,000), the creditor has the right to move the amount due plus interest to next January.

Generally speaking, interest should be around 10% annually and broken down into monthly charges. So the annual interest rate would be $100, which makes the monthly interest rate $8.33. Next January, the debtor would pay the amount due previously ($1,000), plus interest ($8.33), and the amount due that month ($1,000).

The debtor will need to pay $2008.33 in January.

A lot of people might mistake D as the correct answer, but creditors don't have to declare bankruptcy.

Answer 2

The correct option is C. When you miss payments on a loan, creditors have the right to take measures to get their money back. Normally, the creditor will get in touch with you and let the credit bureaus know about the default.

Who is a creditor?

A creditor is a company that extends credit, allowing another company to borrow money that will eventually be repaid. A company that offers goods or services but does not request payment upfront is also considered a creditor because the customer owes the company money for work already completed.

A creditor has a range of alternatives available to it to induce payment if you miss a payment or are unable to pay a debt, including using collection firms. Inability to pay a debt can still have negative effects, such as ruined credit scores and lawsuits, even though debtor's prison is a thing of the past.

Learn more about Creditor here:

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