Many people struggle with debts. Some are capable of paying it back while some are not. Struggling to keep up with bills is one of the reasons to fall into debt. Some consider paying back the partial amount as an option considering that something is better than nothing. In such cases, they end up paying the amount less than the one promised as installments. If you are one of them, you need to understand that lenders do not consider partial payments as actual payments. Hence, your account is considered to be in default. Although partial payments can help you in reducing the interest that is on your debt, it can not be an option. Here is what can happen with different debts if you make only partial payments,
Partial payments can not meet your account’s minimum payment requirements without any prior agreement with that company. Even after paying little money, your account will show the sign of due payment, and the credit card company will report your late payment to credit bureaus. You can also be charged with late fees. The company will also send your debt to a collection agency and even sue you if you do not settle it on time.
If you are not able to afford a full mortgage payment and pay less than the promised amount, your lender may start a foreclosure process. This process usually requires 120 days from the day you fall behind for paying your mortgage. Hence, if you are planning to make a partial payment for a mortgage make sure that you have a backup plan where you can fix the situation. As you only get 120 days to pay the due amount before the lender foreclosures.
Student loans are a requirement. It becomes difficult if you fall back on paying it back. If you have a student loan to pay and you choose to pay partially, your account will still have the amount due and it will not stop your account from going into default. If you have a federal loan, your loan can enter default 270 days after you miss your first full payment. This default is then reported to the credit bureaus, the government can then cut your wages and may even make you lose your tax refund. It works differently with private loans. This depends mostly on the lender, unlike the federal loans. It usually happens that the loan goes into default as soon as you miss one payment or make a partial payment. And once your loan is in default, private lenders can sue you for the amount you owe.
The future of this loan usually depends upon your relationship with the lender. If you are a person who never misses any payment, the lender may accept a partial payment once or twice. However, your loan can go into default within 30 days of your missed payment. If this happens, the lender can take back your vehicle. If you are unable to solve this situation soon, the lender has the right of selling your vehicle and taking the money that you owe him. In worst cases, you may owe money to the lender even after he sells your vehicle or confiscates it.
Most of the time, it is not sufficient if you make a partial payment without a prior agreement with your lender. The lender will not consider it as a payment and it can ultimately affect your credit score. You may also face some serious consequences with late fees. You must plan through your debt. And if due to some reasons you are not able to make full payments you can use some methods which can help you get through it. Contact the lender and communicate about your problem, also ask about the alternate plan of action. Another thing you can do is be strategic and consolidate your debt.