I’ve read a lot about how if you choose to not pay off your debt, it gets sold to a collection agency and then that there’s apparently no way for them to force you to pay it off. But I mean I doubt there’s no way that, that doesn’t impact you negatively. If it didn’t, everybody would not pay back mortgages, medical bills, etc. but if everyone did that, banks wouldn’t give out loans and hospitals would run to the ground if they got no money back, no? I’m kinda confused, how does this work?
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The banks have to loan out money in order to make money on interest payments. They rely on those monthly payments to remain solvent. If enough people suddenly stopped paying, the banks would not have enough money to pay their own obligations and become insolvent.
It’s very similar to a bank run where if too many people suddenly withdraw their money, the bank won’t have enough money to meet their daily obligations.
As long as only a small portion of people do this, the banks will be fine and the only ones who suffer are those who stopped paying because they would end up with bad credit.
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