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What Happens If You Can’t Pay Your Personal Loan on time?

If you default on your personal loan, you will enter a world of foreclosed debt collection agencies and wages. Instead, try to speak to your lender first.

No one (well, very few people) take out a personal loan without intending to repay it. This can mean late fees, collection agencies that bother you, or even end up in front of a judge and garnish your salary. Does this sound like something you want to sign up for? No, neither do we. And it can still happen. You could lose a job or experience a medical emergency or unexpected car repair that puts a strain on your budget. Whatever the reason, you could find yourself in a position where not only are you late on your loan payments but unable to repay the loan at all.


Here’s what happens if you can’t repay your personal loan 

Accumulation of late fees.

The first thing that happens if you do not meet the loan payment due date is a supplement. It’s extra money added to what you already owe. The fees vary, but this information should be fairly easy to find on your loan agreement or on the lender’s website. If you can get back to normal with your loan payments, these late fees will just be part of what you have to pay. You will likely be added to what you owe on your next payment. But if you can pay a lot more, it will return to normal. Mostly.

Damage to your credit score.

If you miss a payment for a few days or even a week, it is unlikely that the credit bureaus will be reported. This is good because once it is sent to the offices, it will be added to your credit report and negatively affect your credit rating. A late payment can significantly affect your score, and a few in a short period of time will really take its toll.

After 30 days, your late payment will be reported. If the 60 and 90-day mark is exceeded, the damage to your score will only increase. It is always worth paying late if you can, even if the damage has already been done. The more you lose payments, the closer you are.

The standard for your loan.

If you do not respect a loan, you have not fulfilled your personal loan contract. Your creditor knows that you are not paying them as planned, so he goes into recovery mode either by sending them to an internal team or by selling your debts to an external collector.

There is no way to know for sure when your loan will go from “late payments” to direct defaults. Indeed, the default point is different depending on the laws of your state and the conditions of your loan. One lender can give you 90 days or more before declaring a standard, while others can call you after 30 days.


Debt collectors call him.

The task of a collection agent is to make you pay as much of your unpaid debt as possible. And while there are many collection agencies, many other collection agencies will try to use dirty and open illegal tactics to get you paid. Learn more about your collection rights in our publication What collection agencies can and cannot do.

Instead of ignoring calls from a collection agency, do the opposite: talk to them and do your best to negotiate. Most collectors will be willing to settle for a guaranteed lower amount rather than pressuring for everything. Try to settle for a lower amount. This way you can close the account and continue.

Go to court and enter your salary.

This is another good reason not to avoid calls from a collection agency. If a collection agency (or the original lender) can’t get you to pay at least part of your debt, there’s a very good chance that you will appeal. That’s right, they will take you to court and ask a judge to rule in your favor.
If this judge speaks in favor of your creditor, your salary will be embargoed. After considering your cost of living, garnishment separates part of your income from any paycheck that is paid to your creditor until your debts are settled. 
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