What happens if I miss a personal loan repayment?


While this is not ideal, there may come a time when you miss a repayment on your personal loan despite your best intentions. But what could this mean for your financial health?

First of all, it’s important to understand how credit grantors and reporting bureaus differentiate between different types of missed payments. Much depends on how long it takes you to make the repayment after the due date.

Most credit grantors tend to have a grace period of up to 14 days for customers to make up for their missed payment, after which it can be recorded on their credit report.

According to the Equifax credit bureau, a refund made:

  • between 14 and 60 days after the due date is a late payment, and;
  • more than 60 days after the due date is considered a fault.

Whether you missed your loan repayment because you couldn’t afford it or simply forgot to transfer funds on time, chances are you will face some level of consequences. Some of them might include the following:

You may need to pay late fees

Most lenders have a standard missed payment penalty that will be charged to your account when you miss a repayment on your loan. These fees are typically charged for all types of missed payments, even those that are rectified within a day or two.

While the amount you may be charged for missing a payment differs from lender to lender, the average late fee for personal loan and car loan products on RateCity’s database is $ 22. $ 14. For comparison, the average late charge for credit cards on RateCity’s database is $ 20.58. Both averages exclude products with late fees of $ 0. Consider checking directly with your personal loan provider to get an accurate number.

One thing to keep in mind is that a missed payment penalty is not always a one-time charge. If you fail to make payment within a specified time, you may be subject to additional late fees as long as it remains unpaid.

You may be charged additional interest

When you miss a payment, your account balance does not decrease as expected, which means you will be charged additional interest on the amount of the missed payment. This increases the total interest payable on your loan.

Your credit score can take a hit

If you neglect to pay your missed repayment for more than 14 days after the due date, you may see the negative event recorded on your credit report. A late payment – paid between 14 and 60 days after the due date – may be posted to your credit report even if the amount owed is minor.

According to Equifax, “It’s unlikely that a single late payment followed by an on-time repayment will have a significant impact on your credit score.” However, as this may still be recorded in your file, it could impact the outcome of a credit application in the future. This is because your repayment history plays a role in lender decision making processes.

During this time, a missed payment that remains unpaid for more than 60 days after the due date is recorded on your credit report as a default and will almost certainly have a negative impact on your credit score. Unlike a late payment, a default will only be recorded on your report if you miss a payment by more than $ 150, but may remain there for up to five years due to its severity.

What should i do if i know i will miss a payment?

If you’re having financial difficulty and can’t afford to pay off an upcoming personal loan, consider contacting your credit provider as soon as possible. They may be able to offer you help with financial difficulties, such as an extension or a payment plan.

Getting in touch as soon as possible and making an agreement with your lender could prevent you from having a missed payment recorded on your credit report. Keep in mind that it may depend on why your payment is late, as most lenders have certain criteria for financial hardship.

You can also access free financial advice by by contacting the national debt helpline.

And if you’ve missed a payment in the past and it’s been recorded on your credit report, consider visiting the RateCity Credit Score Center for ideas on how to get your credit score back in shape.


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