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by ZoF
4473 days ago
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Are you from the USA? This is basically a form of strategic default. Because the debtor hasn't renegotiated their loan(deferred) and has stopped paying for their loan, they defaulted(breached contract, failed to meet obligations, w/e). Because there's no contract, they don't charge interest, but they do hit your credit score and go after the money other ways. In the USA your credit score determines your eligibility for future lines of credit, loans, etc.... In addition defaulting on a loan allows the debtor to garnish wages, tax refunds, etc... It is EXTREMELY RARE that a situation would arise in which the cost of interest on your loan would exceed the cost of a defaulted loan on your credit report. |
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That very much depends on the state and kind of loan; many states do not allow this for mortgages.