What to Do When You’re Delinquent on Debt

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Struggling to pay the minimum on your debts? You’re not alone. According to the Federal Reserve Bank of New York, late payments on student loans, credit cards and other loans are on the rise. In fall of 2018, for example, lenders reported more overdue loans than at any other time in seven years. Meanwhile, interest rates are continuing to go up, making it costlier to carry a balance.

Payments that are only a few days late probably won’t hurt you. In general, lenders won’t report missing payments to the credit bureaus until they’re at least 30 days past due. Some creditors will even forgive your first late payment or waive late fees altogether.

However, a loan payment that’s late by more than 30 days — which, in financial circles, is known as a delinquency — can wreak serious havoc on your finances. Credit scores place more weight on payment history than on any other metric, so you could have trouble securing an affordable loan if your credit report shows one or more missed payments. Your current lenders may also raise your rates dramatically if you repeatedly miss bills.

Don’t panic, though, if you’ve already missed one or more of your payments. Despite the damage they can cause, you can overcome a history of delinquencies.

5 steps to follow when you’re delinquent on debt

1. Take a deep breath and face up to what you owe

Don’t hide from your loan payments. According to Thomas Nitzsche, a credit educator and spokesman for Money Management International, many people try to cope with their debt problems by ignoring them. However, “it’s important to be proactive,” he said.

Size up every bill you owe, including utilities and other expenses, and determine which bills are current and which ones are overdue. Add up the minimum payments alongside other expenses, such as groceries, and compare them with your monthly income.

Then, consider these questions:

  • Are you spending more than you make?
  • How much more money do you need to come up with to pay all your monthly bills?
  • Can you afford to pay next month’s bills or are you at risk of missing another payment?

Answering these kinds of questions can help you determine what steps you need to take and how quickly you’ll be able to turn around your finances.

2. Prioritize your payments

If your next set of bills are due right away and you can’t afford to pay all of them, scan your budget and consider which debts you can temporarily put off.

Some people let unsecured debts, such as their credit cards, become overdue because they aren’t tied to an essential need, such as a home, car, electricity or heating. However, you may want to consider putting off bills that don’t regularly report to the credit bureaus instead, said Nitzsche.

“It depends on what your outlook is on when things are going to turn around,” he said. If you’re confident you’ll be able to come up with your payments relatively soon, then you may be better off skipping an utility bill, such as a cable payment, rather than failing to pay the minimum amount due on a card. Utility companies will often give you more than one chance to pay your bill before they shut off services, said Nitzsche.

Depending on your income, you may also be able to get help paying for utilities from a local charity, he said. If the helpline 211 is available in your area, try calling it and asking for a referral, he added.

3. Boost your income and slash your expenses

If you’re dealing with a monthly shortfall, you’ll need to come up with extra money relatively quickly in order to avoid having your credit deteriorate further. One 30-day late payment on your credit report isn’t nearly as serious as a 90-day late payment, an account that’s gone into collections or multiple delinquencies.

Scan your monthly budget for opportunities to trim expenses. “Look for easy wins,” said Nitzsche. For example, do you have a gym membership you don’t need or an unnecessary magazine subscription? Can you cut cable or make other lifestyle choices? Even making small changes, such as dining out less often, can make a big difference, says Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com.

“If you’re spending $5 a day on coffee across 20 days a month, that’s a hundred dollars a month,” Kantrowitz noted. “These things can add up quickly.” You may also want to consider more dramatic changes, he says, such as splitting rent with a roommate or selling some belongings.

In addition, brainstorm ways to increase your monthly income quickly like by picking up a side gig or asking for a raise.

4. Ask your creditors for help

If there isn’t enough room in your budget to cut additional expenses or pay your overdue debt, then your next step should be to call your creditors and see if they’re willing to work with you on a debt repayment plan.

Some creditors may allow you to defer your payments if you can prove financial hardship. If you have federal student loans, for example, you may be able to postpone your payments for up to one to three years. “Talk to your lender,” said Kantrowitz. “Tell them about your financial circumstances. You lost your job or are taking unpaid medical leave or maternity leave or something else.”

Some lenders may also be willing to cut you a break by cutting your rates, trimming fees or allowing you to pay less than the minimum amount due. For example, your card issuer may offer a temporary assistance program for cardholders suffering from a financial emergency. “Communication is key to figuring out what your options are,” said Nitzsche.

Don’t be afraid to call your lenders even after you’ve missed a payment. Some lenders may be more willing to help you once it’s clear you’re in financial straits, said Nitzsche. Just make sure to call before your account goes into collections, he said. “If you get a no the first time talking to somebody, call back later,” he added.

Finally, consider reaching out to a nonprofit credit counseling agency, says Beverly Harzog, a credit card expert for U.S. News and World Report. A credit counselor may be able to provide you with free advice or help you navigate a debt management plan.

Whatever you do, don’t lose hope. “If you’re drowning, don’t wait,” said Harzog. “Reach out to find out what your options are.”

5. Consider debt refinancing and consolidation

If you’re buried under credit card bills or an auto loan, you could take out a personal loan to pay off your existing debts and make repayment easier.

For example, let’s say you have an auto loan with a high monthly payment. If you need to free up space in your budget, you could refinance your auto loan using a personal loan. Doing so could allow you to extend the repayment term, lowering your monthly due. Keep in mind, however, that this tactic could leave you in debt longer.

If you have multiple debts straining your budget, you could use a personal loan to combine those debts together. That way, you only have one monthly bill to worry about.

Over time, you can work on improving your credit score. Then, you could get a personal loan with a lower interest rate to reduce your total interest costs and monthly payments.

Interested in a personal loan?

Here are the top personal loan lenders of 2019!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.990% APR to 16.990% APR (with AutoPay). Variable rates from 5.74% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.72% APR assumes current 1-month LIBOR rate of 2.49% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.79% – 20.89% (6.79% – 20.89% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 9.99% APR to a high of 35.99% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.

†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com

**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

5.74% – 16.99%1$5,000 - $100,000

Visit SoFi

7.54% – 35.99%$1,000 - $50,000

Visit Upstart

7.99% – 35.89%*$1,000 - $50,000

Visit Upgrade

5.99% – 24.99%2$5,000 - $35,000

Visit Payoff

5.99% – 29.99%3$7,500 - $40,000

Visit FreedomPlus

6.79% – 20.89%4$5,000 - $50,000

Visit Citizens

9.99% – 35.99%5$2,000 - $25,000

Visit LendingPoint

6.95% – 35.89%6$1,000 - $40,000

Visit LendingClub

6.99% – 18.24%7$5,000 - $75,000

Visit Earnest

9.95% – 35.99%8$2,000 - $35,000

Visit Avant

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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