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What Happens When I Can’t Make my Loan Payments?

What Happens When I Can’t Make my Loan Payments?

Loans need to be taken seriously (that’s why they take some effort to get) as the consequences for missing a payment or being unable to continue making payments altogether can be severe. Obviously, things happen and our lives can change in a matter of days, jobs aren’t always so stable and people not so reliable. That’s why taking out a loan needs to be thought about carefully and all potential situations need to be considered.

Unfortunately the answer to the question “what happens when I can’t make my loan payment?” is very simple, stressful and life-changing events. Not only could you possibly lose your car, your house, or get evicted from your apartment right now, the long term consequences will be just as bad. Here’s what happens when you’re unable to make your loan payments.

Late Fees

Most loans have fees that you must pay once you’ve missed the due date for making a payment. These fees can and will start to pile up quickly and since you couldn’t afford to make the original payments increasing them with late fees will only make your situation worse. Every time you make a late payment or miss one altogether you will be charged a late fee and soon your debt will become unmanageable.


If your loan requires you to make a payment each month and you completely skip one month then you will be an entire billing cycle past due, this will force your lender to report you to the credit bureaus. Missing even one payment will have a negative and significant effect on your credit score and the more late payments you have, the lower your score will be.

By the time you’ve missed another billing cycle, you’ll be receiving unpleasant phone calls from your lender and potentially even debt collectors. Once you’ve missed 3 consecutive billing cycles you’ll be unable to apply for a new loan and your credit score will have taken a pretty devastating hit. And don’t forget the interest that all these late payments will incur, soon it will be more than your original payment amount.


If you miss enough payments and don’t do anything to get in contact with your lender then they will potentially charge-off your debt, this means that they don’t believe that you will be able to pay off your loan and have decided to write it off as a loss. The charge-off will show up on your credit report and will signal to future lenders that you were unable to pay back your debts, therefore, making it hard for you to get a loan if you ever need one. Having a charge-off on your credit report will also affect your taxes in the future.


Once your lender has decided to write off your loan as a loss they will probably sell it to a debt collections agency to try and get at least a percentage of their money back. You will now have a collections account on your credit report which along with the charge-off will greatly affect your credit score. Not only will you have collections account on your credit report but you’ll now have to deal with the stress of receiving calls from a debt collector. A debt collector’s only job is to get you to pay them and they will be extremely persistent.

Legal Action

If your lender doesn’t sell your debt to a collections agency then they might take legal actions in order to get the money you owe them. You could be sued for a larger amount than your actual debt or you could be forced by the legal system to pay back the debt in full. But no matter the outcome any legal action will again show up on your credit report thus adding another black mark against you and making it just a little bit more difficult to get another loan in the future.


Bad credit, legal issues and black marks on your credit report can all be dealt with over time and with hard work. The worst thing about being unable to make your loan payments is how you’ll feel about yourself. No one wants to feel like they’ve failed so that’s why it’s important that you seek help before it’s too late. Contact your lender and work with them to find a solution and hopefully, you’ll be able to avoid financial ruin.

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Posted by in Debt
Caitlin graduated from Dawson College in 2009 and completed her Art History degree from Concordia University in 2013. She started working as a freelance writer for Loans Canada right after University, eventually working her way up to Chief Content Editor. Her work has led to a large expansion of the company’s content department and she manages a staff of talented writers who are passionate about educating Canadian consumers about credit, debt, and all things personal finance. With over five ...


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