What Happens if I Fail to Pay my Loan on Time? | Coins.ph

What Happens if I Fail to Pay my Loan on Time?

What Happens if I Fail to Pay my Loan on Time?

Sometimes, life gets in the way of fulfilling your financial responsibilities. While these are unfortunate events, they do not excuse or free us from the consequences of not being able to make timely payments. If you allow lapse payments long enough, this can result in a loan default.

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What is a Loan Default?

When you become delinquent in payments (fail to pay on time) for periods specified under your loan’s terms and conditions, you go into a loan default. The terms vary from one lending institution to another. However, most lenders do set a maximum period of around 90 days to settle any outstanding balances before declaring a loan in default.


What happens to my finances when I default in my loan?

1. Repossession or Foreclosure

If you do not pay your debts for extended periods, you will lose the item or property you’ve loaned for (car, home, credit line, etc). At the same time, you forfeit the previous payments already made to the loan which puts you in poor finances.

Related: What are the Different Types of Loans?


2. Increase in debt

Speaking of finances, unpaid loans incurs late fees on top of interest. These can truly pile up, making your debt bigger and bigger. Even after you simply avoid your lender and stop paying your loans, demands of payment will not stop as they will most likely turnover your account to a collection agency. Those people are particularly heavy-handed when collecting debts.


3. Effect on credit score

Your credit score will drop. While this seems like a non-issue, remember than your credit score is the basis on how easy or difficult it will be to take on another loan from any loaning institution. Should you need a home loan or salary loan later on, you may just be denied.


How to avoid loan default?

1. Understand all documents before signing

Whether it’s your contract or a promissory note for payment on a later day, be sure to read and understand all documents before signing. If you are unsure of any of the terms, do not sign yet. Get a lawyer or someone knowledgeable to help you. One major cause of default is misunderstanding terms and conditions in the loan.


2. Track your loan

Be sure to keep detailed records of your loan including:

  • Loan amount
  • Payment schedule
  • Current payments
  • Current balance
  • Lender contact information
  • Promissory note(s) if any

Keeping track of this information ensures that you never accidentally miss a payment.


3. Notify your lender in case of:

If you experience a change in life which may affect your loan status (critical illness, legal separation, etc), or change your address, name, and/or contact details, be sure to contact your lender immediately. Remember that they can help.


4. Explore these options with your lender

If you truly cannot make payments due to unfortunate circumstances, contact your lender to explore your options. Chances are they may be able to help you get a lower monthly repayment plan, change your payment due date, or can make a deferment as temporary loan relief.


Whether it’s for home credit, Pag-IBIG, or credit card loans, you can pay your bills straight from your phone using your Coins Wallet. Just be sure to cash in to your Wallet and then tap Pay Bills to select which partner you’ll be making a payment to.

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Coins.ph is regulated by Bangko Sentral ng Pilipinas (BSP). BSP Financial Consumer Protection Department: (02) 708-7087 or consumeraffairs@bsp.gov.ph

 In Blog, Money Matters
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