2. Income taxes.
Owe the government and high interest and fees will accumulate very quickly. A Federal tax lien may be placed on your property (and listed on your credit reports). The government may also levy (seize) property and garnish your wages. Money in bank accounts, including what you’ve saved for retirement may be claimed, and your home or vehicle may be sold to pay for the debt.
3. Car title loans.
The interest for these loans is usually 25% per month, equaling an annual rate of 300%. Fall behind and the lender can repossess the car. How will you get to work? Go grocery shopping or drive the kids to school or the doctor? Eventually the vehicle will be sold at auction, and depending on the state you live in, you may also be required to pay the deficiency: the difference between what they sell it for and how much is left on the loan.
4. Owed vehicle payments.
You need to be careful with regular old car financing too. Pay late and your credit report will suffer. If the vehicle is on the new side, the lender may repossess it after only a few skipped payments. After that you’ll face the same problems as the car title loans.
5. Delinquent mortgage.
One might think that a home is more important than a car and that is true, however it can take a lot longer for a home to be foreclosed on than for a car to be repossessed. In fact, it takes on average of 19 months to process a foreclosure. That gives you time to deal with the problem – which you must do or you will be forced to find another place to live, and this time with a terrible credit rating which makes you an undesirable tenant or home loan borrower.
6. Defaulted student loans.
After about nine months of nonpayment, a federal student loan will be in default. The credit damage begins after the first missed payment, and will get progressively worse until the account is assumed by a collector. Fees and interest will be piled on. Up to 15% of your wages may be garnished and your tax refund can be intercepted without a lawsuit. With a lawsuit, the lender can take an even higher percentage of your wages.