When a borrower hasn't paid back a loan on time, the loan is called "adverse." When loan payments aren't made on time, the loan is called a "adverse loan."
Adverse loans can do a lot of damage to your credit score, which could make it harder for you to get loans for other things in the future. If your credit report shows that you have had bad loans in the past, banks and other lending institutions are less likely to want to give you money because your loans with them could also go bad. If you can get a loan even though you have bad loans on your credit report, the interest rate will probably be much higher than if you didn't have any bad loans.
It's important to stay away from bad loans no matter what. Most of the time, credit cards seem to be the type of loan that ends up being bad. As a consumer, it's important to remember that credit cards are not free money. Credit card interest rates are very high, so a smart person, if they use them at all, will pay off the balance every month. If not, it's easy for spending to get out of hand, which can lead to problems with bad loans.
People often try to move their credit card balances to new cards with lower interest rates. Even though it seems like a good idea, doing this can lead to trouble and bad loans. The trickiest thing about transferring balances is that the more payments you have to make each month, the more likely you are to forget or be late, which turns your accounts into bad loans. If you don't pay your credit card bill on time, the company will start charging you full interest rates instead of the low rates you were given at first.
If this happens on more than one card, your monthly minimum fees will all of a sudden be higher and spread out over more than one payment. If these get too hard to handle, you may have to take out bad loans. If you want to avoid bad loans, you should only have one or two credit cards at a time. Also, if you already have bad loans or credit card balances with high interest rates, you might want to get a loan from a bank instead of transferring balances to avoid getting more bad loans. So, you can consolidate your debt and possibly lower your interest rate without having to worry about your payments getting out of hand and leading to bad loans.
If any of your loans become adverse loans, the first thing you should do is call your credit card company and talk to a representative about them. Even though it's not the credit card company's job to fix your problems with adverse loans, they may be able to work with you to find a solution that works for both of you. In the end, though, the less credit cards you have and use, the less you'll have to worry about bad loans.
