What happens when you can’t pay a past due bill, debt, or collection?
We have all been there, unable to pay a bill the moment it became due. You don’t have the funds just yet, so without making an arrangement, you make a mental note to pay it off when you get the funds several weeks from now. You may not have the funds or know when you will get them, so you simply avoid making an arrangement altogether and hope for the best. Each day, millions of Americans find themselves in this very predicament. Here is what happens when you don’t pay a past due bill or debt.
Interest rates increase
When you initially sign up for a credit card, you were likely provided a competitive interest rate to entice you to take the card. As soon as you miss one payment, the interest rate can dramatically increase. Your new interest rate assigned will either remove the option of using the credit card when in a bind or it will become more difficult to pay, monthly. Interest rates typically increase when the account becomes 60 days delinquent. Everything goes great with a credit card until you start to make a few late payments. Credit card companies react in a very stern way when you start to fall behind.
Fees get assessed
You will incur fees. Most late payments range anywhere between $15 and $35, if you are dealing with a credit card account. You can also expect to see service disruption, which can mean additional fees to restore service. You will incur fees each month the payment is late or less than the required minimum. That one payment can leads to a negative entry item on your credit report. This does not go for just credit cards. Utilities, mortgages, vehicle payments, etc. All creditors start to raise fee’s and act in more aggressive ways once the steady payment is not coming in.
Your credit score is updated
Creditors report good and bad standing accounts every month. By law, they are required to do so. Your late payment can be entered on your credit report after 30 days late. This entry remains on your report for seven years. The next late payment will be entered on your credit report at 60 days late. Your account gets another entry for each additional 30-day increment. The account runs the risk of being charged off at 180 days. Vehicle creditors usually start the repossession stage after 90days late. Same with your home loan. They don’t play around. You must pick up the phone and work out a solution. All creditors appreciate communication and usually are willing to work with you.
Accounts go to collection
When your account is sent to collections, you can face serious legal challenges. They may pursue litigation and enter a judgement against you. You will then lose room to pay less that the balance due once the account may be sent to collections. When the account is sent to collections, the immediate balance due is expected immediately.
You start getting calls from collectors
You will start getting calls from collectors once you have hit the 60-day mark. Collectors will call you frequently to collect payment on the late account. You want to be able to avoid impending judgment activity by making arrangements to begin paying down the debt.
Tackling these debt challenges
There are some steps that you can take to avoid any of these steps. You may be able to work out an extension with your creditor. Some creditors will help you avoid any late fees or penalties when an extension is made to you. You can look at short-term lending options from reputable lenders to keep your account current and active. Although a loan may not seem like a viable option to some, consider the immediate drop in credit score you can have with just one negative entry on your credit report. You don’t want to run the risk of having to pay an even larger bill to restore your account. You may be on the hook for fees, interest, and restoration fees. If you pay it off with the use of a cash advance or short-term loan, you can put an immediate halt to any collection activity or impending fees.
Communication is paramount when you suspect you will be late on a debt. You want to make sure that you make an arrangement with your creditor the moment you believe there is a chance that you’ll be late. You may be a little strapped for cash, and they may be able to work with you. If they aren’t able to work with you, you definitely want to pursue a loan to keep the account active, current and out of collections, which can cause your score to drop 100 points or more in a short amount of time.
