Getting through with Delinquent Debt

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When the borrower is all of a sudden can’t pay the amount loaned on time, that is when a debt is considered delinquent. When the payment is past due, the lenders are sending letters as well as emails and even calling borrowers to remind them. There are also banks that are informing the reporting bureaus of the situation.

Within a six months period, the financial institution will try to collect the debt in many different ways like using the following:

  • Law firms
  • Accountants
  • Controllers and;
  • Collection agencies

Assuming that you defaulted, delinquent debt is going to significantly affect your credit score which makes it harder to get approval in the future. Most of the lenders do hold debts for a span of six months and then, selling them to the collection agency.

Different Kinds of Delinquent Debt

There are several examples of delinquent debt and among it is the deficiency balances like real estate and installment contracts as well as auto loans. Other known examples are medical receivables, bad checks, credit card charge offs and student loans. The category of legal-related debt will include judgments and dismissed bankruptcies. Borrowers owe payments to private investigators, lawyers and even banks and all other financial institutions. There are various sources for bad checks like retail chains, financial establishments and food stores. Other known examples are insufficient funds and closed accounts.

Lastly, delinquent debt includes automobile loans and home equity. The money is owed to the finance companies, car lots, banks and retail stores.

How Severe a Delinquent Debt is?

According to research, it showed that around 8.8% to 10% of borrowers are holding credit cards that are categorized as delinquent. Some chose to file bankruptcy for protection. Clients who have low income level are actually likely to utilize delinquency.

At the same time, households that are facing financial distress have greater possibility of dealing with financial challenges in the long run.

What You should Expect?

In case that you’re couple of months behind, then your financial institution might report your account to credit bureaus. One way that you can prevent this from happening is by developing a repayment plan, which is entirely based on your situation. If you can’t keep up with your payments due to serious illness, divorce or job loss, then it is best to talk to the loan officer and discuss your situation. Perhaps, there are other alternatives that can be offered and settle the debt you incur.