While personal loan debt only makes up 1% of total consumer debt, there is still 21.1 million in outstanding personal loan debt.
In 2019, there was a delinquency rate of 3.39% on personal loan repayment plans. This number actually improved from the previous ten years of data.
There are several reasons why a person might miss a loan payment. From accident to negligence, either way, you might wonder what you should do if you miss a personal loan monthly payment.
What consequences will you face for missing a payment? How can you fix your error?
Read on for what to do if you miss a payment for your personal loan.
Are you worried you’ve missed a personal loan payment? Wondering what the consequences will be for missing a payment? Let’s take a closer look.
If you missed payment and it’s still within the billing cycle, you can likely fix it with minimal consequences.
You may have late fees added to your account. Most lenders don’t report to the credit bureaus until after 30 days. So, if you can get caught up, the only consequences might be the late fees.
Once your loan becomes more than 30 days past due, it’s considered a delinquency. The lender will likely report your delinquency to the credit bureaus, and it will impact your credit score.
The lender will continue to seek payment, add late fees to your account, and report to the credit bureaus.
The later your payment is, the more negatively it impacts your credit score.
Typically, a loan that goes this long past due is considered a default on a loan. A default says you’ve failed to meet the required terms of your loan.
This will greatly impact your borrowing in the future.
Often a loan this past due it’s sold to a third party. This means the lender has given up trying to get the amount due.
That doesn’t mean you don’t still owe the money or that the loan won’t continue to impact you negatively. The third party will begin their collection activities by trying to get you to pay.
So, you missed your personal loan repayment plan payment. Don’t panic; you can fix it.
Many people get into a financial jam and panic. Instead of acting proactively, they hide and avoid the issue. That’s probably the worst thing you can do.
Start by contacting your lender to discuss the issue. Even if you can’t make the payment that day, let them know when you can make a payment. They may even have options to help you get caught up.
Consider when you get paid. Your financial institution can send an automatic payment on the day you request. It might make sense to set up an automatic payment plan.
If your payday doesn’t align with your due date, you might also request a different due date so you don’t continue to make late payments.
There are a variety of apps you can add to your phone that can help you keep track of payments and due dates. Some even allow you to connect to your bank and send the payment through the app.
You can also use the calendar on your phone and set an alert to help you remember your payment due date.
You can overcome the impact of one missed or late payment from your loan agreement if you fix it and get on track going forward.
Repaying a loan according to the terms you agreed upon is important. It’s important to understand the impact of not making your payments on time or at all.
Let’s take a closer look at the potential consequences of not paying your loan payment on time.
You already know that your personal loan costs much more than just the principal. You have loan fees and interest that are a part of what you’ll pay back.
When you pay your loan payments late, you also incur late fees. The later your payment is, the greater the fees. Some loans have terms with a set late fee, while others are a percentage of your due amount.
Once that is tacked onto your amount due, you’ll also pay interest on it.
When you make late payments, the lender could report to the credit agencies, negatively impacting your overall credit score.
35% of your credit score is based on your payment history. So, a late payment can lower your credit score.
When your credit score is lower, borrowing money in the future can cost you more.
When you miss payments, your lender may turn your account over to a collection agency. In addition to negatively impacting your credit, now you have to deal with the credit agency.
They can be assertive in getting the money collected. You may also face additional fees. If the credit agency can’t get you to pay, they may file in court to get the money from you.
When you don’t pay on your current loan, it can impact your ability to get a loan in the future.
If you don’t pay, it negatively impacts your credit score. This can mean either your next borrowing experience will cost you more, or you won’t be eligible at all for a loan.
If you have a secured loan, then you could lose your collateral when you don’t pay your payments.
For example, if you buy a car with a loan, the vehicle is the collateral. If you fail to make the payment, the lender can take the vehicle back from you.
Making your personal loan monthly payment is important for your financial security. You want to protect your credit score and history by showing you’re a responsible borrower.
If you need a personal loan, we can help. Check out our personal loan options that might be a good fit for you.