Why can’t you just *not* pay off a loan/dept/etc?


I understand that the IRS makes sure you play taxes, but what about loans? Like can’t I just get a movie from a redbox and never return it since i’d only have to pay when I returned it?

In: Economics

Certain loans involve collateral where they can seize your property if you don’t pay (auto and home loans tend to be like this as well as some commercial loans).

Even for loans without collateral, you can be taken to court and your assets seized if you don’t pay.

However, the cost of doing so tends to prohibitive, so most of the time lenders will simply report to the credit bureaus your failure to pay. This hurts your credit rating, which can impact your ability to gain future loans, employment and rent housing.

Not sure about all types, but you end up with liens on your property (collateral) in many cases. From there eventually the property can be confiscated to sell and pay off the lien/loan.

Best case scenario people will know you never pay back your loans. And the you will get turned down for basically anything you aren’t paying full price in cash with.

Wanted to buy a house? Nope.

Wanted to rent an apartment? Yeah, also no.

In addition to others’ comments about potential loss of collateral, failure to pay debts can damage your credit record, making it more difficult for you do make other purchases in the future, like buying a car, getting a lease for an apartment, or obtaining credit generally.

If you take out a loan and don’t pay it back, the bank will sue you. If you don’t show up in court, they’ll garnish your pay or seize your assets.

redbox has your credit card on file, if you don’t return the movie they will charge you $30 for the lost movie. I guess technically you could just not pay the credit card company either, but eventually you will run out of people not to pay. You might not be able to get a job either, some places won’t hire you if you have a horrible credit score.

Morally, agreeing to something then breaking your word is bad.

Legally, if you agree to something with the deliberate intention of not living up to your end of the bargain, that’s called “acting in bad faith”. It can also be called “fraud”. These can carry various negative consequences.

Financially, failure to pay will result in a bad credit record, which will result in you being unable to borrow money in the future – unless its from guys who are quite willing to do things the law disapproves of when you fail to pay them. Vinny and Marco would love to break your legs, for instance, for stiffing their boss Rico the Rat for $5 grand.

When you rent a movie from Redbox, [you enter a contract](https://www.redbox.com/transactionterms). They have your card, and if you don’t uphold your end of the contract they start charging extra fees. Eventually they stop, but it’s after they’ve charged you a good bit more than the movie was probably worth. So you’re encouraged to bring it back on time.

With something like a car, that’s an asset. If you decide to not pay, the bank’s going to call and ask what’s up. If you ignore them, one day a person with a tow truck will show up and take the car away. The car is not *your* property until the bank’s loan is paid off.

If you blow off a big loan like that, it goes into your credit history. The next car you try to buy will be much harder to finance. You’ll be approved for less money and the interest rate will be worse.

So life is easier when you pay your debts and fulfill your contracts.

I read this as why can you not pay a loan/debt off *all at once* and was like yeah no because it’s terrible for your credit score and then I read the comments and realized OP may have meant just not pay at all and was like yeah no that’s terrible for your credit score. So basically same difference.

You surely can just not pay, the same way you can just not pay taxes.

When you don’t pay something you contracted (when you rent a movie you sign a contract) when it’s due it starts counting interest.

When your debt is big enough to justify the expenses they sue you and then many things can happen depending on the law of your jurisdiction.

If the judge finds you guilty and you still refuse to pay, they go to your address and try to convince you in person to pay up on the spot. If you still refuse they take stuff to offset the debt. If you don’t own anything that’s worth it, they will confiscate a part of your salary (your employer only gives you part of your salary and the remaining goes directly to repayment of the debt). If you don’t have a job or your salary is below a certain threshold you are forced to file for bankruptcy. Since you have nothing of value you will be on a kind of probation for some years. If you get a job in that period, your salary gets confiscated. If you don’t get a job they just give up and you start a new life when the probation is over.

when you took out that loan you opted into a contract with the bank that issued it under the promise that you will eventually pay under the terms set .

if you decide to not pay you breached this contract and they are in their right to execute the measures that contract enables: often this is taking the collateral that was agreed(an asset or set of assets you placed as the guarantee that you’ll pay) and if that is not possible they have a case to take you into court to seize whatever other assets are allowed in order to settle the debt in full. if for w/e reason that is not possible(ie: nothnig to seize) the entity will have ot report the loss to a credit bureau and this will impact your record/credit Score whichwill inhibit your ability to get further Loans/credit.

on smaller scale stuff like rentals the item itself is the collateral that if failed on the loaner can charge you to replace it and failing that they can refuse service.

Do you want to do business with people or businesses that don’t uphold their end of the agreement? You buy a car, but it self-destructs an hour after you drive it off the lot? You buy groceries, but you get home and the steak is rotten and the milk is curdled? You buy tickets to go to the movies, and they direct you into an empty room where nothing happens and eventually you just leave? You rent an apartment, but when you get there someone is already living there? You accept a job offer and move across the country, but whoops, they gave the job to someone else instead?

Yeah, you don’t want to do business with people like that. And if *you’re* like that, no one will want to do business with you, either. Between terrible credit scores, lawsuits, repossessions, foreclosures, and a generally all-around terrible reputation for being dishonest and not paying, you’d find it increasingly difficult to exist in society.

Businesses use a lot of different strategies to deal with problem borrowers:

– Deposit. You have to put down money, you only get it back if you return it.
– Credit card on file. The company takes your credit card info and charges you for the costs of your shenanigans, plus a fee.
– Internal reputation / blacklist. The company keeps records of all its loans, if they recognize you trying to borrow again, they’ll refuse to let you.
– Industry-wide reputation / blacklist. Multiple companies or entire industries all talk to each other about bad borrowers. This is basically what a credit rating is — if you screw one company by not repaying a loan, getting additional loans later gets much harder, with higher rates and worse terms.
– Collateral. The company sets up the loan so that they can seize and sell your house, car, or other property (e.g. stocks).
– Lawsuits. The company can sue you. If you don’t show up to court, or lose the case, the company can ask the judge to order your employer to send part of your pay directly to pay off your debt, and/or order the sheriff (police) to physically take away your property to be sold to pay your debts.