Installment loans have a monthly installment loan payment, but what really happens if you’re late on a payment?
Though there will be a minor penalty for being late to a payment, this is the best option over missing a payment or not paying the loan back entirely. With each missed payment, the consequences get more severe.
Late to an Installment Loan Payment
Being late to a loan payment isn’t the end of the world usually; however, there will likely be some sort of reprimand.
In the best-case scenario, your loan will have a grace period where your payments aren’t technically late if they are made within the grace period following the due date.
As soon as the repayment is missed and the lender reports the late payment to the credit bureau, you may be subject to fees and penalties. This can occur within the first 24 hours that the payment was late.
Such fees vary and should be included in your loan agreement terms, but this late fee can range from just $25 to a whopping 5% of the outstanding loan amount.
Before accepting a loan, make sure you know your lender’s loan agreement terms on repayments and compare these penalties with other lenders to ensure the best outcome if something occurs.
I’m Late On My Payment, Now What?
If you do miss making a payment on time, the best thing you can do is pay the fee and bring the account current before the next billing cycle is complete. If the payment is not brought current, it can damage your credit score, and you could be further penalized.
Missing Monthly Loan Payments
Let’s say you were late on a payment, and then you had not repaid this amount by the next billing cycle. This would cause your account to be deemed “delinquent,” which means that your lender can report the missed payment to the credit bureaus.
This report will become a negative mark on your credit report for around seven years.
Though this is not ideal, it’s still not the end of the world. There are ways to get the mark removed from your report, though it can cost even more:
- Dispute the information with the credit bureau
- Initiate a discussion directly with the reporting business
- Hire a professional credit-repair service
- Get credit counseling
- Pay for delete
- Write goodwill letter
- Simply wait it out
Your lender will continue to try and make contact with you when missing two or three repayments, depending on the lender.
However, once you have missed three to six repayments, your account will change from “delinquent” to “default.” A “default” status on an account shows that you have failed to repay the loan according to your loan’s agreement terms.
What Happens If I Don’t Pay Back My Installment Loan Payment?
Once six months or more of repayments have been missed, the lender will “charge-off” your account. It’s possible for a lender to do this prior to six months of repayments accruing.
A “charge-off” on your credit report indicates that the lender has officially given up trying to collect money from you for the outstanding debt.
This does not mean you’re off the hook for repaying the loan though. From here, the lender will sell the debt to a third-party collection agency, and they will attempt to collect your outstanding debt rather than the lender.
Seek out a loan that has a grace period for repayments.
If something occurs and you’re late to a monthly loan repayment, pay the repayment and the penalty fee as soon as you can. This is your best bet to not enter a cycle of debt.
Even if you miss a payment or two, continue to pay off what you can on your monthly payments; otherwise, your credit report will suffer.
Ready to Receive a Loan?
Here at Cash Link USA, we love helping those in tight financial situations. If you live in Texas, Kansas, Missouri, Tennessee, or Wisconsin, Cash Link USA is ready for you.
Learn more about Cash Link USA and installment loans! The idea of missing an installment loan payment is daunting, contact us today and let us ease your mind!