If you don’t pay an installment loan, you may be charged late fees and your credit score will go down. Some other consequences of not paying an installment loan include defaulting on the loan, getting pestered by debt collectors and potentially a lawsuit. The more monthly payments you miss, the worse the consequences of not paying will be.
Consequences of Missing Installment Loan Payments
Getting charged a late fee
Some lenders will charge late payment fees of up to $39 if you do not make your monthly loan payment on time. There may be a grace period in your loan agreement that will forgive a payment that is a few days late, though. You can also call the lender to ask if they will waive the fee if you have a history of on-time payments.
Damaging your credit score
Your credit score will drop if your payment is over 30 days past due. If the payment is less than 30 days past due, your credit score will not suffer because the payment won’t be reported to the credit bureaus as being late yet.
A late payment will stay on your credit report for 7 years. You can use WalletHub’s free credit score simulator to see how a late payment may affect your credit score.
Going into default
Defaulting on a loan means you’ve violated the terms of your loan by not making payments for a certain amount of time. The time period will be different for each lender and each type of loan, though. Once you default on the loan, the debt will generally be sent to collections. Defaulting is very bad for your credit score.
Dealing with debt collectors
After you default on a loan, a debt collector will send you notice that your account has gone to collections. It is important to know your rights when dealing with them. For some debts, the collector may negotiate a debt settlement for less than what you owe.
Getting sued by the lender
A loan provider or debt collector can sue you if they do not receive payment from you. Your state’s statute of limitations dictates whether or not they have legal grounds to sue.
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