Generally, failure to pay back a personal loan has serious repercussions. When you fail to pay back a personal loan, the lender can report you to the credit bureaus, sell your debt to a debt collector, or take legal action against you.
Within the first 60 days of missing a payment, you may be given the grace to pay up or charged extra fees for the late payment. If you do not attempt paying within this period, your account is considered delinquent, and the lender can report the missed payment to the credit bureaus, which will appear in your credit report for as long as 7 years.
A negative mark on your credit report will affect your chances of securing personal loans with favorable interest rates in the future.
Within 60 to 120 days of missing a payment, your account moves to default status, which means you have failed to repay the loan according to the loan agreement terms.
When your account moves to default status, a charge-off appears on your credit report, which indicates that the lender has sold the debt to a third party, generally referred to as a debt collector.
The debt collection agency that takes over your debt can employ whatever means necessary, including lawsuits, to get you to pay.
The consequences of defaulting on a personal loan can be severe and affect your credit score for a long time. It is always advisable to keep your account up to date through whatever means necessary to avoid the implications of late or default payments or embarrassments from debt collectors.