What is Delinquency?

Delinquency has different meanings depending on the context. Unfortunately, the meaning is never positive. When it comes to a loan, if you are delinquent, it means you have failed to pay an outstanding debt. In other words, you have not upheld your end of the bargain and owe either a portion or the entire amount of your loan. If you are late or overdue on a payment, there are consequences for being delinquent. The consequences can vary depending on the type of loan, but most of the time, you will be required to pay a late fee, in addition to the outstanding balance and any applicable interest.

The amount of time before a loan is considered delinquent will vary from case to case. In general, if you have an installment loan, missing two successive payments will normally make the account delinquent. When it comes to credit card payments, a delay of 15 to 30 days is typically allowed before the loan is delinquent. If a loan is delinquent for a certain amount of time (usually 270-330 days depending on your payment schedule) and you have not made any payments to rectify the situation, the loan will go into default and the entire loan balance becomes due.

Making a Late Payment

Regardless of why you borrowed money or what type of loan you have, if you miss any payment at any time, you are delinquent. The delinquency begins on the first day after you miss a payment. Your lender is required to send you at least one written notice or collection letter during the first 15 days of delinquency. If you stay in delinquency for an extended period of time, you will continue to get notifications on a regular basis. If your delinquency extends for 9 months or longer (roughly 270 days), your loan holder declares you in default and may take legal action against you.

If you know you will have trouble making your loan payments, do yourself a favor and speak with your lender before you default. There may be options in order to avoid a missed payment, such as asking for forbearance or deferment. Also, you may be able to change your repayment plan and lower your monthly payment. If you consider your options sooner rather than later, your financial future will be much brighter. Plus, you can avoid the negative consequences of default such as a hit to your credit score, wage garnishment, and potential court and attorney fees.

How to Recover from Delinquency

If you are already in default, there are steps to take to improve your situation. First, participate in a rehabilitation program that helps borrowers get out of debt. You can often reverse many of the negative consequences of default through these types of programs. If you make a certain number of on-time payments in succession, your loan will be considered out of default and back into repayment.

It is also helpful to seek professional advice if you are experiencing severe economic hardship, and you know even a rehabilitation program will not help you make future loan payments. A certified financial advisor can examine your situation and determine the best way to get your loan out of default and help you get back on your feet.