If you're unable to pay off your installment loan on time, you will immediately get notifications about your default. Late payments could also have effects on your credit score, and you could be subject to additional charges.
Of course, the severity of the consequences will depend on how many payments you miss.
What Happens If I Default on an Installment Loan?
While the protocols that go into effect vary between loan providers, here are some possible outcomes that you could expect if you don't pay the loans back:
Payment notifications
Most times, you immediately get a notification from your lender that you have defaulted on your payment and that you need to take action to remedy the problem. Most of these notifications come with quick links that explain how you can process your payments.
Effects on your credit report
In some cases, the lender might report the payment as being late on your credit report. For many people, timely payments count as benefits on their credit scores. However, a single late payment could affect their credit scores negatively, and they won't want that.
Late fee charges
Some lenders could also charge you extra for making late payments on your loans. The interest rates could be increased, meaning that you will need to pay an added sum to the initial interest rate.
Credit bureau reports
If you miss multiple payments in a row, then the consequences could get direr. You could have to deal with finance or additional late fees, while the lender could reserve the right to report the payment to credit bureaus.
If you've missed your payments for an extended period, the lender could consider you to be in default on your loan. Most times, this occurs after you've had multiple missed payments within 90 days.
Conclusion
All of this goes to show that it is much better to pay your loans back as of when due. However, when you can't repay a loan, it is advisable to contact your lender and see if it's possible to work out a new payment plan.