We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners.
What Happens If I Default on a Personal Loan?
Defaulting on a personal loan can have serious consequences, including a damaged credit score.
Steve Nicastro is a former NerdWallet writer and authority on personal
loans and small business. His work has appeared in USA Today, The New York Times and MarketWatch. He holds a bachelor’s degree in journalism from Quinnipiac University.
Kim Lowe is a lead assigning editor on NerdWallet's loans team. She covers consumer borrowing, including topics like personal loans, buy now, pay later and cash advance apps. She joined NerdWallet in 2016 after 15 years at MSN.com, where she held various content roles including editor-in-chief of the health and food sections. Kim started her career as a writer for print and web publications that covered the mortgage, supermarket and restaurant industries. Kim earned a bachelor's degree in journalism from the University of Iowa and a Master of Business Administration from the University of Washington. She works from her home near Portland, Oregon.
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
You’re following Steve Nicastro Visit your My NerdWallet Settings page to see all the writers you're following.
You had every intention of repaying your personal loan when you signed the loan agreement. But then life happened — maybe an unexpected job loss, injury or divorce — and now you’ve missed a payment and you’re facing default.
Defaulting on a personal loan means your monthly payment is overdue. As a result, your loan may be heading to collections, and your credit score is likely taking a hit.
It's time to take action: Contact the lender and explain your situation. Some lenders will offer short-term payment relief. You may be able to mitigate serious damage by being proactive.
Here’s what to expect if you default on a personal loan, and steps to take now if you face default.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Typically, a personal loan in default means a payment is late by 90 days. The exact timing depends on the type of loan, the lender and the terms of your loan agreement.
Personal loans are delinquent, but not in default, if a payment is just a few days late. You may be charged a late fee after a grace period of 10 to 15 days. The fee can be charged as a dollar amount ($15 to $40) or a percentage of the payment due (around 5%).
The payment must be at least 30 days past due for the lender to report it as a late payment to the credit bureaus. Late payments can knock as much as 100 points off of your FICO credit score if you have good to excellent credit (690 to 850).
Missed payments not only damage your credit score; they also stay on your credit report for up to seven years and can make it harder to qualify for new credit.
Once your loan defaults, the lender either moves the unpaid loan balance to an in-house collections department or sells it to a third-party debt collector. You may receive phone calls, letters, e-mails or text messages from the collection company in an attempt to recover the debt.
If your loan is unsecured, the lender or debt collector can take you to court to seek repayment through wage garnishment or place a lien on an asset you own such as your house.
If the loan is secured by an asset such as your car, savings or investment accounts, the lender has the right to seize the asset to recover its losses, as stated in the loan agreement.
For example, if the loan was secured by a car title, the lender may send a letter demanding payment. It can repossess the vehicle if not repaid within the specified time frame.
Finally, if you have a co-applicant on your loan, whether a co-signer or co-borrower, that person is on the hook to pay up if you default.
Contact the lender: Be proactive and call the lender before your next payment is due. The lender may be able to provide some relief — such as temporary suspension or deferment of loan payments — if you explain your situation.
Know your rights: Understand your rights under the Fair Debt Collection Practices Act (FDCPA) if you face default or if your debt has already entered collections.
It’s illegal for debt collectors to use abusive, unfair or deceptive practices when attempting to collect on debts. If a debt collector is harassing you or breaking the law, you can file a complaint with the Consumer Financial Protection Bureau and contact your state’s attorney general.
Contact a lawyer: If you’ve already been served with a lawsuit, seeking legal help is likely your best course of action.
You’ll need to appear in court to avoid a default judgment in which a judge resolves the case and automatically rules in favor of the lender or debt collector.
Speak with a credit counselor: A credit counseling agency can work with you on your budget or create a new budgeting plan, which can free up cash to pay down what you owe and help you stay current on all of your debts.
Comparing options? See if you pre-qualify for a personal loan - without affecting your credit score
Just answer a few questions to get personalized rate estimates from multiple lenders.