What Happens If You Miss a Personal Loan Payment?

Life can be unpredictable. Whether it’s an unexpected medical bill or a sudden change in employment, you may find yourself thinking, "I can’t pay my personal loan. What should I do?"

If you're worried about the punishment for non-payment of a personal loan, the most important thing to know is that you have options. However, failure to pay back a loan does have consequences, and they can escalate the longer you wait. Understanding the timeline of what happens if you don't pay a loan can help you take the right steps to minimize the damage.

The Timeline of a Missed Payment

Lenders generally follow a standardized process when a payment is missed. Here is a day-by-day breakdown of what can happen, depending on your lender, if you miss a personal loan payment:

Days 1–15: The Grace Period

Most lenders, including those Upgrade partners with, offer a short grace period. If you make your payment within this window (usually 15 days), you may be able to avoid a late fee.

• Action: Check your loan agreement to confirm your specific grace period. If you can pay now, do it immediately to help you stay in good standing. At this stage, the missed payment has typically not yet been reported to credit bureaus.

Days 16–30: Late Fees and Reminders

Once you pass the grace period, the first "penalty" typically kicks in.

• Late Fees: You will likely be charged a late fee. At Upgrade, this is typically up to $10.
• Internal Collections: You will receive emails or phone calls reminding you of the past-due balance.

Days 30+: Credit Score Impact*

This is a critical turning point. What happens if you don't pay back a personal loan for more than 30 days? In addition to late fees, late payments have an effect on your credit score. 

• Credit Reporting: Most lenders report delinquencies to the three major credit bureaus (Equifax, Experian, and TransUnion) once they are 30 days past due. A single late payment can stay on your credit report for seven years from the date of the missed payment.
• Score Drop: A single 30-day late payment can cause your credit score to drop noticeably, depending on your payment history. The later the payment, the more damaging it can be, especially if it moves into the 60, 90, or 120+ day late territory.

Days 90–120: Default and Collections

If you stop paying a personal loan entirely, the account will eventually enter "default."

• Charge-Off: The lender may write the debt off as a loss and sell it to a third-party collection agency.
• Collections: You may deal with debt collectors, which can be a stressful experience.
• Legal Action: In some cases, the lender or collector may sue for the balance. If they win, this could lead to wage garnishment or a lien on your property.

"I Can't Pay My Loan. What Should I Do?”

If you know you’re going to miss a payment, the worst thing you can do is ignore it. Here is how to handle the situation proactively:

1. Contact Your Lender Immediately: Don't wait for them to call you. Explain your situation honestly. Many lenders have hardship programs that may allow for temporary payment deferral or a revised repayment schedule.
2. Request a Due Date Change: If your payment date doesn't align with your payday, ask your lender to move it. This simple fix can prevent future late payments.
3. Prioritize Your Debts: If you have to choose which bills to pay, prioritize "secured" debt (like your car or home) first, but try to make at least the minimum payment on your personal loan to avoid credit damage.
4. Look into Credit Counseling: Nonprofit credit counseling agencies can help you create a budget or a Debt Management Plan (DMP) to get back on track.

Common Questions About Non-Payment

Managing Your Payments with Upgrade

At Upgrade, we want to help you succeed. One of the best ways to avoid missing a payment is to use Autopay. Not only does this ensure your payments are always on time, but it may also qualify you for a lower interest rate.

If you are facing a temporary financial hardship, reach out to our team as soon as possible to discuss your options.

Stay Informed and Proactive

Understanding what happens if you don't pay your personal loan back is the first step toward preventing it. If you're looking to simplify your bills into one manageable payment, check out our debt consolidation options and check your rate today with no impact to your credit score.