Line of Credit

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Line of Credit
Line of Credit Debt

One important thing that you should remember about a line of credit is this: you will increase your debt every time you use a line of credit.

Any money that you owe on a line of credit is debt which you will have to pay back sooner or later. Since money owed on a line of credit is debt you will have to pay interest on it. Anytime you use a line of credit you increase your debt.

This is why you should never use a line of credit unless you know you will be able to pay it back. Unpaid debt will cause your credit score to fall and could get you into legal trouble.

Consequences of Unpaid Line of Credit Debt

Having unpaid line of credit debt can get you into big trouble. Persons with unpaid debt can face legal trouble and have their lives made miserable by debt collectors.

The line of credit lender could report you to the big three credit bureaus as having unpaid debt. This will cause your credit score to fall and make it hard or impossible to get credit in the future. It could also affect job and rental applications you fill out in the future. It sometimes takes years to get records of unpaid debt removed from your credit report.

If you have an equity line of credit the lender can seize whatever property you’ve put up for equity and sell it off to recover its losses. If you have a real estate or home equity line of credit the lender could institute foreclosure against you in order to seize the property.

The lender can also sell unpaid line of credit debt to a collections agency. The collections agency can harass you with phone calls and letters. It can also take legal action such as filing liens on your bank accounts or real estate or garnishing your salary. You may not be able to access your money until you pay of the liens and debts.

Collections agencies and sleazy attorneys can harass you for years if you have unpaid debt on your record. Your only recourse could be to file for bankruptcy, which is an expensive and inconvenient process.

Even if you do file for bankruptcy, the bankruptcy judge could require you to pay back all or some of your debts. Bankruptcy courts have the right to seize whatever money is in your accounts and use it to pay off your debts. They can also have your possessions seized and sold off in order to pay your debts.

Avoid Line of Credit Debt

The way to avoid the consequences of line of credit debt is obvious: pay off your debts and don’t take out lines of credit you can’t pay off. Never take out a line of credit that you won’t be able to pay off.

Line of credit debt that you can’t pay will get you into trouble. This trouble can be avoided by limiting line of credit debt to what you can pay off.