It used to be that your local bank or credit union was the only place to get a loan. But with the rise of online lenders, it\u2019s easy to get financing without leaving your home.<\/p>
However, online lending can have its cons: these lenders may not stick around as long. Some online lenders go out of business due to poor business plans, while others may get shut down for legal reasons. Many are startups and simply can\u2019t make it through those tough first few years.<\/p>
We take a look at what happens when a lender goes out of business and the steps you should take.<\/p>
Yes. When you borrow money, you sign a legal contract containing specific terms and conditions related to your repayments, rates and loan term. The legal status of your contract doesn\u2019t change when your lender shuts down.<\/p>
In fact, you might not notice much of a difference in your repayment experience after a lender goes out of business. That\u2019s because your debt is typically up for sale or handed off to a liquidation firm when a lender closes. Another company simply buys or acquires your loan and starts receiving your repayments. You\u2019re still on the hook to make your loan repayments \u2014 with the same APR and repayment terms.<\/p>
Your new lender will inevitably notice and this can seriously damage your credit score. Depending on why your original lender shut down, it\u2019s possible that your new lender will be even better<\/em> at keeping track of your repayments.<\/p> Payments that are more than 30 days late can show up as delinquencies on your credit report, sometimes resulting in a drop of around 100 points in your score. Any defaults could follow you around for years to come, making it difficult to qualify for future loans, credit cards, mortgages and other forms of credit.<\/p> Firstly, the lender will stop funding new loans. This typically won\u2019t affect you unless you have a line of credit you\u2019d like to tap into or want to apply for a new loan.<\/p> After funding stops, one of three things happen:<\/p> At this point, you should receive notification from your lender or the new company you\u2019ll be paying to. More than likely, your loan terms and conditions remain the same \u2014 unless your lender charged rates that are higher than your province or territories legal limits, in which case your rates may decrease.<\/p> If a court agrees that you were a victim of predatory lending by taking on the loan, you could receive a refund of any interest or fees you paid under the illegal conditions.<\/p> Here\u2019s a few ways to keep on top of what you owe when a new company buys your loan:<\/p><\/a>Here\u2019s what typically happens to your loan when a lender shuts down<\/h3>
<\/a>Borrower checklist<\/h3>