What is a common consequence of defaulting on a loan?

Defaulting on a loan typically leads to legal action from creditors, making this choice the most accurate representation of a common consequence. When a borrower fails to meet the repayment terms of a loan, creditors may attempt to recover the owed amount through various means, which can include lawsuits, wage garnishments, or placing liens on property. This legal action is a serious repercussion designed to protect the lender's financial interests.

The other choices do not align with the effects of defaulting on a loan. For instance, an improved credit score is unlikely following a default; instead, a default negatively impacts credit ratings, causing scores to drop. Additionally, the loan amount does not automatically increase due to default; typically, the borrower is still responsible for paying back the original amount borrowed. Lastly, lower interest rates would not be a consequence of defaulting, as such an event typically leads to higher risk assessments from lenders, which may result in increased rates for future borrowing.