Because you’re borrowing money at a relatively high interest rate, the very first risk to consider is how difficult it might be to pay it back. Some people take out an installment loan because they are living paycheck-to-paycheck and desperately need the money for urgent expenses. But after they’re able to cover the expense, they still are struggling to make ends meet and then they also have this new loan payment.
That being said, know that installment loans are not a long-term financial solution and should only be used to meet short-term financial needs when you know you can afford repayment.
When people get behind on their installment loan payments. This can lead to all sorts of additional penalties and fees on the loan making the payments even more expensive.
In this case, the borrower could end up struggling to ever pay the loan back. The financial institution could then take the borrower to court in order to try to get a judgment against them in order to seize assets or garnish wages. If you’re unable to pay, you could have to go through bankruptcy.
In addition, not paying your installment loan will damage your credit since your missed payments will be reported to credit bureaus. That will further damage your credit and make it more difficult to rebuild your credit score.