Payments On Personal Loan: Serious Consequences of Not Paying on Time

Late Payments On Personal Loans

Firstly, missing payments on personal loans will likely incur a late fee, as dictated by your loan terms. Late fees typically range from $25 to $30, but in some cases, it can be as much as 5% of the outstanding loan amount.

Moreover, after about 30 days, the missed payments on personal loans will be reported to credit bureaus, damaging your credit score. A 30-day late payment can cause your credit score to plummet by as much as 110 points, significantly affecting your financial life for years to come. Your credit score is essential for borrowing, signing up for utilities, finding an apartment, and even getting insurance.

As the delinquency continues, your account will eventually go into default status. During this time, the lender will attempt to collect the money and you may incur additional fees and penalties.

If the lender sees no hope of collecting, they will charge off the account and report it to credit agencies. The lender may send your account to collections, and a collection agency will try to recover the money from you.

In some cases, lenders may take legal action against you, filing a lawsuit and obtaining a judgment against you. This legal action could lead to a lien on your property or wage garnishment, severely impacting your financial situation.

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Late Payments On Personal Loans – How to Avoid Consequences?

To avoid these serious consequences, it’s crucial to continue making payments on personal loans. If you encounter financial difficulties, reach out to your lender immediately to explore possible solutions and avoid falling into default. Your lender may be willing to work with you to find alternative payment arrangements, preventing dire consequences and preserving your financial stability. It’s essential to be proactive and responsible when it comes to managing payments on personal loans.

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