June 8, 2022
A single missed payment on your personal loan may cost you additional money in the short and long-term. A potential late fee is just the start. You may want to think twice before you skip a payment and consider all of the possible consequences, which may include:
1. You May Incur a Late Payment Fee
Under the terms of your loan agreement, you made a commitment to make monthly payments due on a certain day each month. If your payment is late and depending upon the terms of your note, your lender may charge you a late payment fee. Late charges can be a flat fee or a percentage of your monthly payment. For example, if your monthly payment is $200 and the lender charges a 5 percent late fee, you’ll be charged an additional $10. Some lenders allow a grace period, which could range anywhere from 5 to 15 days, but the sooner you can make a payment, the better.
2. You may Incur Additional Interest
When you miss a monthly payment, interest still accrues, and you may pay additional interest over the life of the loan.
3. Your Credit Score May Take a Hit
Missed payments may be reported to the three largest consumer reporting agencies, TransUnion, Experian and Equifax. However, in some cases if you’re less than 30 days late, you may avoid the transgression being recorded on your credit report. Lenders are required to wait on reporting until your payment is at least 30 days past due. After this 30 day period, your payment may be recorded as delinquent. Late payments stay on your credit report for up to seven years and may affect your ability to borrow money in the future.
4. You Might Have to Forfeit Your Collateral
If you took out a secured personal loan, you backed up your promise to pay your loan with pledged collateral such as your house, car, or other asset. When you miss a payment, you potentially jeopardize that collateral. If you miss several payments and ignore collection attempts, your possessions could be repossessed.
5. Your Loan Might be Called Due
While a single missed payment may not derail your financial stability, missing several payments without communicating with your lender could escalate the matter. Under the terms of your loan, if you default, the lender may have the right to call the entire loan due. That means that the full amount would be immediately due, including interest, fees, and legal expenses.
6. Your Loan Might be Referred to Collections
Another route lenders can take to recoup money owed is to refer the note to a collection agency or litigate the case in court. If your lender does sue you in court for the unpaid debt and wins a judgment against you, you are then responsible for the money you owed, plus late fees and possible legal expenses.
7. Future Lenders May Not Want to do Business with You
If you have a default on your record, future lenders may be reluctant to loan you money. A history of past due payments may have consequences such as higher interest rates for car loans, mortgages, insurance, and credit cards.
What to Do If You’re Going to Miss a Loan Payment
You can help prevent late payments with a good budget and payment routine. If you do accidentally miss a payment, contact your lender and pay the amount due as soon as possible, preferably within the grace period. Even if your payment is paid past 30 days from its due date, it’s better to communicate with your lender than to have potential collection attempts escalate. If you’re having financial trouble, reach out to your lender, as they may have options available to assist you.
Looking for a lender who understands your specific needs? Contact Mariner Finance today to apply for a personal loan.
The information provided in this article does not constitute financial advice and is provided for educational purposes only without any express or implied warranty of any kind. This article is not intended as legal, tax, investment, or any other advice, and Mariner Finance does not offer credit repair services. Consider talking with an appropriate qualified professional for specific advice.
Blog posts are for informational purposes only.