Question

if you have a $1,000 loan from your local bank and also have $1,000 in your savings account at that bank and you need to pay the rent in two days, what can happen if you get behind on your loan and notify the bank that you wont be able to make your payments? a. the bank can take your car as collateral even if you own it free and clear. b. the bank can take your childrens college money even though it is held in a different bank. c. the bank can force you to declare personal bankruptcy to repay the loan. d. the bank can seize your savings account and use it to repay the loan.

Explanation:

When a borrower defaults on a loan and has funds in a savings account at the same bank, the bank may exercise the right of set - off. This allows the bank to use the funds in the savings account to offset the outstanding loan balance. A car owned free and clear is not automatically collateral without prior agreement. College money in a different bank is not accessible to the defaulted - on bank. A bank generally cannot force personal bankruptcy; it is a legal process initiated by the debtor or under specific legal circumstances.

Answer:

D. The bank can seize your savings account and use it to repay the loan.