Consequences of not paying your loan on time

Aug 28, 2020

Being at ease in financial management is a lifelong process. Come to think of it, life loves giving us surprises that no one should be surprised anymore whenever you feel like hurdles are thrown your way and you have enough lemons to build a lemonade stand. When a life emergency happens, like sickness, death in the family, natural disasters, or losing a job, a financial emergency also occurs. If you have existing loans, it might lead to a loan default – and that’s a serious problem.

When you have an unpaid loan in the Philippines, what happens is the dire fate of dealing with financial consequences. There will be so many things at stake, which means your health will suffer from endless worrying, sleepless nights, and stress – among others.

Let’s look at loan default in the Philippines and what we can do about it.

What does a loan default mean?

According to Investopedia, a loan default can be described as failing to make repayments for any form of loan or security. This includes not being able to pay interest rates and not just the principal loan amount. Any borrower can be on loan default when they miss making payments, keep on making late payments, and totally ceasing making repayments.

A loan default will be reached when you are 270 days late in settling your debts.

What does loan delinquent mean?

Before being tagged as default, you first face the risk of being loan delinquent. Basically, that means being 90 days late in paying your loan. When this happens, your credit report will take a hit and you will no longer have access in gaining new lines of credit. It may also affect applying for utilities and other necessities like mobile plans, cable, and internet services.

What happens when you miss repaying your loans?

The inability to pay your loan leads to many serious unfavorable outcomes and consequences. The most essential ones to look into are:

  1. You will be charged fees and interests which will pile up your loan.

Contrary to what one might think, when you fail to make repayments, the loan does not really go away. In fact, without paying one time, you are just adding to the amount that you owe. And, the longer that you fail to pay, the higher these fees and charges increase. You get overdue charges, penalties, interests, and other types of charges. In the Philippines, the usual late payment fees for an unpaid loan range from 200 to 600 pesos per month, or 7 to 10 percent of the loan amount, depending on which one is higher.

  1. You might suffer from repossession or foreclosure, depending on your loan.

On worse cases, borrowers are at also at risk of having their property foreclosed and their vehicle repossessed if the default is an auto loan or housing loan. This will serve as the lenders way to recover what they lent you. For instance, if you took out an SSS loan, the property foreclosure will happen within six months of failing to pay.

  1. If you have a government loan, you won’t get your benefits.

Speaking of government loans, when you have a PAG-IBIG loan or SSS salary loan and fail to make your payments, they still have ways to collect from you. Your contribution pool for your retirement will be the one that’s deducted.

  1. Your credit score will dive down.

Your credit report is dependent on how you act and operate your finances. Whatever you do, basically, will lead affect your credit score. This is because financial institutions report your payment behavior to credit reporting agencies. By having a delinquency or a default, your credit score will decrease and it will deeply affect your financial future financial opportunities.

What happens when you fail to pay your loan?

As a lending platform, has its own specific Terms & Conditions that you have to read, understand, and review, before you take on this adventure. A few of the important things you should note are:

  1. Any time you miss a payment or you fail to settle the full amount, the team will reach out to you as an attempt to collect.
  2. The contacting efforts will include SMS, calls, snail mail, email, and messages to your social media accounts.
  3. Failing to pay 2 days after the due date is already equivalent to an overdue account, but efforts to collect will still continue.
  4. If 7 days pass and still no payment have been made, an additional charge of 25% of the amount due will be added. There are other possible fees related to collection that might be included, too.
  5. Your loan will be placed into default after failing to pay 3 consecutive monthly payments. The borrower will be sent a default notice and termination notice. With this, borrowers are required to settle the total loan amount, inclusive of all other penalties and fees.
  6. After the notice, the borrower will be given 17 days before sends a report to the credit bureaus.

Responsible borrowing is the key. is committed into being the best lending platform in the country. We pledge the best service to our borrowers, but we have promised this to our investors, too. This is why we treat everything seriously and why we send out reminders to help you stay on track. On your end, remember to practice smart financial management and make better choices in how you manage your money.

For questions and clarifications, talk to us at [email protected]